Moody's upgrades Ukraine's rating to ‘Caa2’

Moody's Investors Service has upgraded the government of Ukraine's local and foreign currency issuer and senior unsecured ratings to ‘Caa2’ from ‘Caa3’ and changed the rating outlook to ‘positive’ from ‘stable’, the agency said in a press release.
"The upgrade of Ukraine's government ratings to Caa2 from Caa3 is based on the following key drivers: the cumulative impact of structural reforms that, if sustained, are expected to improve government debt dynamics; the significant strengthening of Ukraine's external position," the report said.
At the same time, Moody's affirmed the ‘Ca’ senior unsecured rating of the government's $3 bln bond sold to Russia in December 2013. The bond is currently in default, Moody’s said.
"The rating upgrade was limited to one notch because Ukraine faces a heavy external debt servicing burden in 2019-21 that will require additional foreign currency funding beyond what official lenders are likely to provide over that period. The debt service for those years includes paying off the first three of the bonds issued in the 2015 debt restructuring. The risk that Ukraine will be unable to achieve a smooth refinancing of these debt obligations due to an unexpected domestic or external financial shock is a key risk, keeping the rating at Caa2 at present," the agency said.
Ukrainian Prime Minister Vladimir Groysman said in end-July that the country spends over $3.8 bln (around 4% of GDP) on debt servicing per year.

Source: TASS