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Ukraine鈥檚 Russian bailout deal lifts rating
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Ratings agency Standard and Poor’s yesterday raised its outlook for Ukraine to stable from negative, saying a multi-billion dollar bailout deal from Russia should mean Kiev meets its external financing needs over the next year.
The outlook change means that S&P is now less likely to further downgrade its ‘B- /B’ assessment of Ukraine’s creditworthiness on its sovereign debt, which remains deep into junk status.
Russian President Vladimir Putin last week agreed after talks with Ukrainian President Viktor Yanukovych to buy US$15 billion of Ukrainian government debt and also slash the price Ukraine pays for Russian gas by one third.
S&P said the cash injection of US$15 billion — about 8 percent of Ukraine’s predicted 2014 GDP — “should cover the government’s external financing needs over the next 12 months.”
It added that “based on our expectations of Russia’s support” S&P no longer expected a devaluation of the Ukrainian hryvnia.
But the agency also warned that the Russian support appeared subject to good diplomatic relations between the two ex-Soviet states being maintained.
The Kremlin offered Kiev the package after it rejected a pact for closer ties with the European Union which was strongly opposed by Moscow. The rejection sparked mass protests in Kiev.
“We understand that Russia could revise this financial aid on a quarterly basis,” S&P said.
“Ukraine’s financial dependence on Russia will increase if market conditions do not afford the government the opportunity to issue debt to international capital market participants other than Russia, or if other sources of financing are not found.”
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