On August 27, Russian and Ukrainian media reported on a new rating by Fitch for Ukraine. But they presented only some of the ratings agency’s outlook, thereby importantly distorting the information.
Lenta.ru reported, for example, that Fitch acknowledged the inevitability of a default: “International ratings agency Fitch downgraded Ukrainian foreign-currency country ceiling from under-default ‘CC’ to ‘C’ which means that default is inevitable.”
However, while this is partly true, these media neglected to give a full account of Fitch’s assessment and therefore the full context.
One of Ukraine’s rating in foreign currency was downgraded due to a distressed debt exchange, as Ukraine managed to get almost $3.6 billion debt write-off, which will lead to financial losses for its creditors. Ukraine now defaults on old bonds, but issues new ones due in 2019-2027 and exchanges them for the current bonds due to 2015-2023.
What many media did not mention was the following assessment by Fitch as it announced the downgrade: “Ukraine’s ratings will be raised out of default shortly after Fitch determines that the exchange has been successful, which is typically measured by a minimum participation rate of 90%. The new rating will be consistent with Ukraine’s prospective credit profile and debt structure.”