(Bloomberg) -- Ukraine’s credit score was lifted out of default by Fitch Ratings as the Eastern European nation enacts its agreement with creditors to delay debt payments.
The war-torn country’s credit rating was upgraded to CC from RD -- or restricted default -- on Wednesday by Fitch. The move comes after bondholders agreed to defer about $6 billion in sovereign principal and interest payments for two years amid war-related spending needs.
“Despite this debt servicing relief, the ‘CC’ rating reflects unresolved debt sustainability risks resulting from Russia’s attack and Ukraine’s highly stressed public and external finances and macro-financial position,” according to a Fitch statement. “A broader restructuring of the government’s commercial debt is therefore probable in our view, although the timing is uncertain.”
Ukraine was downgraded to default scores by both S&P Global Ratings and Fitch on Aug. 12 after investors representing around 75% of $19.6 billion worth of the country’s foreign bonds agreed to defer coupon and principal payments until 2024. An overwhelming majority of bondholders also approved a request to amend the terms of payments on so-called GDP warrants, which are linked to the country’s economic growth.
The upgrade Wednesday follows the execution of the debt deferral, which Fitch said “constitutes completion of a distressed debt exchange (DDE), curing the ‘restricted default.’”
The country is still rated in selective default by S&P, while Moody’s Investors Service rates it at Caa3.
(Updates with context throughout.)
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