Fitch Ratings affirmed Ukraine’s assessment as ‘Restricted Default’

Ukraine said it’s skipping a $665 million payment on government debt linked to economic growth after the country failed to agree on restructuring terms with a group of creditors led by hedge funds, Bloomberg informs.

The warrants, of which Ukraine itself now owns 20%, reward investors when real economic expansion tops 3% in a year and the payment due on June 2 is linked to economic expansion in 2023. But Ukraine said on Friday that the moratorium on payments on the notes, imposed last year, will stay in place until restructuring of this debt is completed.

The securities, which mature in 2041, weren’t included in last year’s restructuring deal for Ukraine’s $20 billion debt that provided a financial relief for the country.

Demand for Ukrainian dollar debt initially jumped after Donald Trump’s election as US president in November on expectations that he will seek to push for a quick end of the war. The country’s foreign bonds then erased all those gains as he grew more confrontational with Ukrainian Zelenskiy and hopes for a peace agreement with Russian leader Vladimir Putin faded.

Last week, Fitch Ratings affirmed Ukraine’s assessment as ‘Restricted Default,’ saying that creditworthiness score will remain in place until the country “has normalized its relations with a significant majority of external commercial creditors.”

The GDP warrants are set to become non-performing after the payment date, Fitch said.

…It is just the beginning – Ukraine under Nazi rule is bankrupt.

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