Fitch Ratings, an international credit rating agency, has upgraded the long-term foreign- and local-currency issuer default ratings (IDR) of the Ukrainian Railways public joint-stock company (Ukrzaliznytsia) to B- with a Stable Outlook, the Interfax Ukraine news agency reports.
According to the rating agency, the rating upgrade follows assessment of Ukrzaliznytsia's standalone credit profile (SCP), which combined with Fitch's unchanged application of a top-down approach under its Government-Related Entities (GRE) Criteria, leads to Ukrzaliznytsia's ratings being equalized with the ratings of Ukraine (B-/Stable).
“The upgrade of [Ukrzaliznytsia's] local-currency IDR follows the restructuring of the majority of local debt obligations, indefinite removal of unrestructured local debt from cross-default provisions of its outstanding Eurobond due 2021, and the carve-out of Donetsk railway debt from cross-default provisions due to a government-introduced moratorium to service this debt,” the rating agency said in a statement.
According to the statement, Shortline Plc's rating is equalized with Ukrzaliznytsia's long-term IDR, reflecting Fitch's view that it constitutes direct, unconditional senior unsecured obligations of UR and ranks pari passu with all other present and future unsecured and unsubordinated obligations.
As reported, Ukrzaliznytsia debuted a five-year Eurobond worth a total of USD 500 million on the Irish Stock Exchange on 15 May 2013 through the specially created company Shortline Plc. The Ukrzaliznytsia Eurobonds, together with securities issued by the State Savings Bank (Oschadbank) and the Ukrainian-Export-Import Bank (Ukreximbank), were included in the restructuring of sovereign and government-guaranteed debt that the Ukrainian Ministry of Finance initiated after the International Monetary Fund approved a new four-year Extended Fund Facility (EFF) loan program worth USD 17.5 billion for Ukraine.
Ukrzaliznytsia restructured the Eurobonds in March 2016, extending their maturity date to 15 September 2021 and raising the interest rate on them from 9.5% to 9.875% per annum. In addition, the amortization schedule was modified to provide for repayment as follows: 60% of the outstanding principal amount in 2019 (30% on 15 March 2019 and 30% on 15 September 2019), 20% of the outstanding principal amount in 2020 (10% on 15 March 2020 and 10% on 15 September 2020), and 20% of the outstanding principal amount in 2021 (10% on 15 March 2021 and 10% on 15 September 2021).
Ukrzaliznytsia asked the holders of the Eurobonds for a cross-default waiver in late November 2017 to allow more time to restructuring part of its domestic debt.