Ukraine's post-restructuring credit rating to stay low, Scope says
By Marc Jones
LONDON, Aug 5 (Reuters) -Ukraine's post-debt restructuring credit rating is set to stay low to reflect the risk that another writedown could be needed further down the line, European rating agency Scope has cautioned.
Kyiv's restructuring, now in the final stages, will wipe out around $11 billion of its debt, but with the war with Russia ongoing and a huge stack of domestic and IMF loans untouched in the rework, its finances will remain stretched.
Scope's sovereign analyst Dennis Shen highlighted how the restructuring only affects $21-22 billion of an overall $142 billion debt pile - not even 15%.
"Although the Eurobond restructuring certainly does support debt sustainability – especially over the near term during the years of the IMF programme – long-run debt sustainability might remain unresolved," Shen told Reuters.
The International Monetary Fund estimates that Ukraine's debt-to-GDP ratio would have reached almost 100% by next year without a writedown. In order for it to keep lending to the country, the Fund wants Kyiv to get that ratio down to 82% by 2028.
Shen declined to say what Ukraine's post-restructuring rating was likely to be, but pointed to the country's circumstances and that the vast majority of its debt is domestic or multilateral lender debt that won't be restructured.
"Wartime implications for debt sustainability may present challenges for Ukraine's (foreign currency) rating even following the Eurobond restructuring," Shen said.
Some firms, like S&P Global, had a 'B' bracket rating for Ukraine before Russia's invasion in 2022. Back then debt-to-GDP was less than 60%, however, meaning many ratings followers now expect the post-restructuring score to remain in the risky 'C' category.
For now though, Scope is preparing for the prospect of putting the rating into what is known as "selective default", a score that reflects an expectation that a default won't last too long.
Ukraine missed a 2026 Eurobond coupon payment on Thursday. If that payment is not made within a 10-day "grace period" concluding on August 10; "this could represent a selective default," Shen said.
Reporting by Marc Jones; Editing by Chizu Nomiyama
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