By KYIV. Dec 12 (Interfax-Ukraine) – S&P Global Ratings downgraded its long-term issuer credit rating on Ukrzaliznytsia to ‘CC’ from ‘CCC-‘ on the company’s proposal to holders of its eurobonds maturing in 2024 and 2026 to defer all payments on them by 24 months.
"We see a material weakening in the Ukrzaliznytsia’s debt repayment capacity, and we think a default on the Ukrzaliznytsia’s debt is an almost certainty as per S&P Global Ratings methodology," the agency said in a statement on its website.
According to it, the negative outlook reflects S&P Global Ratings’ view that Ukrzaliznytsia is likely to implement its debt restructuring plans in the next few weeks, which the agency considers tantamount to a default.
S&P said it would lower the ratings to ‘SD’ (selective default) once the debt restructuring is implemented.
"We understand that the proposal to defer debt service does not include any debt haircuts and offers some additional compensation and covenant concessions to eurobond noteholders in the form of a consent fee," the agency adds.
The two eurobond issues currently come due in July 2024 ($594.9 million) and July 2026 ($300.0 million) and constitute almost 80% of all Ukrzaliznytsia’s debt.
S&P Global Ratings added that deterioration in Ukraine’s capacity to provide further financial support weakens Ukrzaliznytsia’s liquidity position. The deferral of the debt service payments will allow Ukrzaliznytsia to use liquidity to cover ongoing operating and capital expenditure.
