Naftogaz restructures bonds, lifting itself from credit default rating

Fitch Ratings has raised the credit rating of Naftogaz of Ukraine from restricted default "RD" to "CC" following the completion of the restructuring of the company's Eurobonds, reports the agency's website.

Fitch maintained the company's rating at "RD" from the end of July 2022.

"Naftogaz's 'CC' IDR reflects our view that even after the restructuring, the company's credit risk remains very high and a default of some kind appears probable. Naftogaz's amended Eurobond payment schedule assumes main principal payments starting from July 2024, and the company's projected liquidity remains extremely weak and unpredictable," says Fitch's rationale.

In July 2024 and July 2025, Naftogaz must make two payments of $165.5 million each.

The highest rating in the history of Naftogaz was in 2005 – "BB-". For the entire time since 2004, it has dropped to "RD" twice.

Naftogaz Chairman Oleksiy Chernyshov said that Fitch's decision will contribute to raising money on international capital markets on better terms.

"Despite the war, we are returning and strengthening the trust of investors. Thank you to the team and partners for working together," he wrote on Facebook.

Naftogaz has been in default for more than a year on the issues of 2022 and 2026 Eurobonds.

In the summer of 2022, Naftogaz of Ukraine did not make payments on its Eurobonds. The company, which was headed by Yuriy Vitrenko at the time, claimed that it had money to repay bondholders, but the Cabinet of Ministers did not allow it.

In August 2022, the state oil and gas company agreed with the owners of Eurobonds, whose maturity date was in July 2024, to postpone payments to 2026.

During the spring-summer of 2023, the company agreed with the bondholders and the government of Ukraine on the restructuring of the overdue bonds of 2022 and 2026 and resumed payments on them in September.

In June 2023, Naftogaz launched the procedure of enforced recovery of $5 billion from Russia.