Ukraine's foreign and local currency sovereign ratings rise

S&P raised Ukraine’s foreign currency sovereign credit rating by one notch to ‘B-/C’ from ‘CCC+/C’ and the local currency rating to ‘B/B’ from ‘B-/C’, with a positive outlook on the country. The agency said the new governing coalition and cabinet pave the way for a renewal of relations with the IMF and better policy coordination that will allow Ukraine to restore economic and fiscal sustainability. S&P noted the positive outlook on Ukraine indicates “upward pressure on the ratings building this year and next if fiscal and external pressures abate.” Additionally, the agency noted greater investor confidence post-election will favour a higher external debt rollover rate and larger FDI inflows to the country, thus improving Ukraine’s financial account balance in 2010. Ukraine was downgraded to ‘CCC+/C’ in February 2009 on the back of risks to IMF funding to the country.

Interpipe fails to pay on Eurobond coupons

UR has written earlier about Interpipe's problems with its creditors. On February 5 Interpipe's Eurobond owners were waiting for the coupon payment, which have never materialized. The tranche on July 2007 $200 mln Eurobond issue should have amounted to $8.75 mln. Now the repayment of Eurobonds themselves, which is planned for August 2, 2010, is under threat.

It is rumored that most of the Eurobond issue belongs to Interpipe now and that non-payment of the tranche is a method of pressuring other Eurobond owners to agree for debt restructuring, once Interpipe offers it.

S&P does not believe in Ukraine's default in 2010

Rating agency S&P does not believe that Ukraine will default on its sovereign debt in 2010. Representatives of the agency say that political instability in 2010 will delay the pension and energy sector reforms, however, even with significant budgetary pressures Ukraine is going to go through the year default free.

Ukraine's debts - main risk of 2010

Ukraine's obligations both government and corporate on short-term debts in 2010 is about $20 bn. Same obligations on long-term debts in 2010 is $10 bn. Therefore, overall Ukraine should pay off $30 bn in 2010. Thus the magnitude of default in the country totally lies with creditors. In their turn creditors will assess the situation in Ukraine depending on the power change in the country. Ukraine's presidential elections will slowly move into local elections and then there is a risk of Autumn re-election of the parliament. Therefore, 2010 promises to be a difficult year for Ukraine both politically and financially. Source.

Ukraine's probability of default on sovereign debt accoring to CMA Datavision is lower only to Venezuala, and both countries have probabilities of default above 50%. Source.

Fitch downgrades Interpipe rating to Restricted Default

Fitch downgraded Interpipe Limited long-term default rating to ‘RD’ on Dec 18. Lowered ratings of the company are due to lack of understanding between the company and creditors as well as with Eurobond holders ($200 millions outstanding).

Fitch sees a considerable risk that Interpipe can default on paying back the loans once the period of extension agreed with the creditors runs out. Further postponement of payments should be agreed upon in January 2010 and Fitch expects these negotiations to be difficult.

Overall Interpipe owes $900 million at the end of the III quarter 2009. In September it was announced that Interpipe will seek additional financing from Barclays Capital and Citigroup Inc., which arranged the loan for the company in May 2008.

Earlier this year it was reported that Ukrainian billionaire Viktor Pinchuk wants to sell shares of Interpipe Ltd. in an IPO by the end of 2011.