Ukraine Credit Rating Cut by Fitch on Deteriorating Financing

Ukraine’s foreign-currency debt was downgraded by Fitch Ratings, which cited a worsening financing outlook in the face of “heavy” repayment obligations and growing political risks.

Fitch lowered its assessment of Ukraine’s debt one step to CCC from B-, taking it below Greece and bringing it line with Standard & Poor’s, which cut its grade Jan. 28 and Moody’s Investors Service.

“Sovereign access to external financing and the sovereign’s ability to refinance a heavy external debt repayment schedule, have deteriorated,” Fitch said in a statement today. Talks between the opposition and President Viktor Yanukovych have progressed slowly, raising the risk of a prolonged impasse, renewed disorder and increased policy uncertainty, it said.

Yanukovych’s snub of a cooperation pact with the European Union at the end of November sparked street protests that last month turned deadly and led to the cabinet’s collapse. The central bank yesterday imposed limits on foreign-currency purchases to bolster the hryvnia after interventions failed to halt its slide and depleted international reserves.

The hryvnia, which has fallen to a five-year low of 9 per dollar several times in the past three days, gained 3.5 percent to 8.545 by 7:30 p.m. in Kiev, according to data compiled by Bloomberg. That pared the decline this year to 3.4 percent.

Foreign reserves shrank to $17.8 billion in January, the lowest since 2006, from $20.4 billion a month earlier, according data published by the central bank today.

Russia halted payments from a $15 billion loan package agreed in December, after transferring a $3 billion tranche, awaiting the formation of a new government. Fitch said the loan probably won’t be forthcoming, undermining the sustainability of debt repayments.

“Fitch has previously warned that further Russian support is likely conditional on President Yanukovych’s continued political survival,” Fitch said. “We no longer assume the Russian loan will be disbursed in full, while Ukraine has lost external market access.”

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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