Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's downgrades Ukraine's government bond rating to Caa1 from B3 and places the rating on review for downgrade

Global Credit Research - 20 Sep 2013

Frankfurt am Main, September 20, 2013 -- Moody's Investors Service has today downgraded Ukraine's government bond rating to Caa1 from B3 and placed the rating on review for downgrade. Today's action was prompted by:

1) Heightened concerns over Ukraine's external liquidity position. The country's foreign-exchange reserves are already at a very low level and pressure on reserves is likely to rise due to increased domestic demand for foreign currency in the autumn and significant foreign-currency-denominated debt repayments until end-2014.

2) Increased downside risk related to future negotiations with the IMF, which has negative implications for external liquidity and progress on domestic economic reform.

3) Increased political and economic risks due to deteriorating relations with Russia, following expectations that Ukraine will sign an Association Agreement with the EU at the EU's Eastern Partnership Summit in November 2013.

The review will focus on (1) the development of foreign-currency reserves, e.g., driven by the demand from the population and gas imports, (2) the status of negotiations with the IMF and (3) the outcome of, and Russia's reaction to, the EU's Eastern Partnership Summit.

Moody's has also downgraded the rating of the Ukrainian State Enterprise "Financing of Infrastructural Projects" to Caa1 from B3 and put the new rating on review for downgrade, in line with the sovereign action. The enterprise's debt is fully and unconditionally guaranteed by the government of Ukraine.

RATINGS RATIONALE

--RATIONALE FOR THE REVIEW FOR DOWNGRADE

The primary driver underlying Moody's decision is the further deterioration in the country's external liquidity position since the last downgrade in December 2012. Ukraine's foreign-exchange reserves have fallen by 30% year-on-year to around $19.7 billion at the end of August 2013. This implies a coverage of just 2.3 months of 2012 imports and an External Vulnerability Indicator (EVI) of around 300% in 2014, which is well above the median for B1-C rated countries of around 90% (EVI: short-term external debt + currently maturing medium- and long-term debt + non-resident deposits over one year/official foreign-exchange reserves).

Furthermore, the pressure on foreign-exchange reserves is likely to increase in the coming months due to increased demand from the domestic population, higher gas imports and downside risks to exports. Beyond a seasonal increase in the coming months, domestic demand for foreign currency is likely to be further inflated by increased local media speculation to devalue the currency. Gas imports are likely to rise in the coming months given that 2013 year-to-date imports have fallen short of imports in previous years and are unlikely to be sustainable at current low levels in the winter months. Lastly, sovereign foreign-currency-denominated debt service (principal and interest) amounts to $10.8 billion until end-2014 (including IMF debt due by the central bank). Given that the government's cash balance (deposits at the central bank and commercial banks) is limited, at around $1.8 billion in July 2013, and that its access to international markets is also currently limited, the government foreign-currency-denominated obligations add to reserve pressure.

The second driver of today's rating action is Moody's view that downside risks related to future negotiations with the IMF have increased. The Ukrainian authorities recently passed legislation to issue treasury promissory notes, an instrument that the IMF is unlikely to favour (for more information, please see Moody's Issuer Comment "Ukraine: Treasury promissory notes highlight wider economic challenges"). In addition, there is discussion domestically to re-introduce a duty on non-cash foreign-exchange purchases, which was eliminated under a previous IMF programme. These issues add to the already stalled progress on highly sensitive key political issues required by the IMF, including: (1) a rise in domestic gas prices; (2) a more flexible exchange rate; and (3) fiscal adjustments and a budget based on realistic assumptions. The president and ruling party's declining popularity and nearing presidential elections in March 2015 further add to concerns about reaching agreement on a new IMF programme as well as keeping it on track.

The third driver of today's rating action is worsening relations with Russia. Russia has been explicit about its disapproval of a potential Ukraine-EU Association Agreement, which is due to be signed at the EU's Eastern Partnership Summit in November 2013. While Moody's views the prospects of signing this agreement as credit positive for Ukraine in the medium-term given that it will support Ukraine's institutions, economic and political reforms, the short-term credit negative impact of a negative reaction by Russia outweighs these benefits. In this context, Russia recently restricted (or at least delayed) Ukrainian exports by increasing non-tariff barriers for several weeks. Given that Russian exports account for around 25% of Ukraine's total exports, restrictions could impair economic growth and foreign-exchange generation. Disagreements with Russia could also extend to other areas in the economic (e.g., gas imports, gas prices) or the political sphere, with negative consequences for Ukraine.

--FOCUS OF THE REVIEW

The review will focus on three main areas: (1) the development of foreign-currency reserves, which are e.g. driven by the population's demand for foreign currency and gas imports; (2) the status of negotiations with the IMF; and (3) the outcome of, and Russia's reaction to, the EU's Eastern Partnership summit.

WHAT COULD CHANGE THE RATING DOWN/UP

The rating is currently subject to significant downward pressure due to concerns about Ukraine's external liquidity. A further decrease in reserves in the coming months would exert downward pressure on the rating, as would a lack of an IMF programme by the end of the review period. A deterioration in Ukraine's balance-of-payments situation would also exert downward pressure on the rating. Furthermore, a harsh reaction by the Russian authorities to the signing of the EU Association Agreement would also increase downward pressure on the rating. In addition, sustained liquidity shortages in the banking system, serious asset quality or financing problems, or a deterioration in public debt metrics would exert downward pressure on the rating. Moreover, any regulatory interventions by the central bank to impose long-term capital controls and/or undermine bond or deposit contracts could also contribute to downward rating pressure.

Given the significant risks facing the country, we see very little upward potential in the rating in the foreseeable future.

COUNTRY CEILINGS

Moody's has also changed the local-currency country risk ceilings to Caa1 from B2. This is the maximum credit rating achievable in local currency for a debt issuer domiciled in the country. In addition, the rating agency has changed Ukraine's foreign-currency bond country ceiling to Caa1 from B3 and its country ceiling for foreign-currency bank deposits to Caa2 from Caa1. These ceilings are lower than the local-currency ceiling as they also capture foreign-currency transfer and convertibility risks. Short-term country and deposit ceilings remain unchanged at NP.

GDP per capita (PPP basis, US$): 7,374 (2012 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 0.2% (2012 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): -0.2% (2012 Actual)

Gen. Gov. Financial Balance/GDP: -4.6% (2012 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -8.4% (2012 Actual) (also known as External Balance)

External debt/GDP: 76.6 (2012 Actual)

Level of economic development: Very Low level of economic resilience

Default history: At least one default event (on bonds and/or loans) has been recorded since 1983.

On 18 September 2013, a rating committee was called to discuss the rating of the Ukraine, Government of. The main points raised during the discussion were: The issuer has become increasingly susceptible to event risks. Other views raised included: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's fiscal or financial strength, including its debt profile, has materially decreased.

The principal methodology used in these ratings was Sovereign Bond Ratings published in September 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Thorsten Nestmann
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Bart Jan Sebastian Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades Ukraine's government bond rating to Caa1 from B3 and places the rating on review for downgrade
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: