Fitch downgraded Ukraine’s rating to pre-default level after its debt restructuring deal.

Fitch Ratings downgraded Ukraine’s long-term issuer default rating (IDR) in foreign currency from CC to C.

“Ukraine’s downgrade reflects Fitch’s view that the agreement in principle reached on July 22 between the government and Eurobond holders on the terms of restructuring after the adoption of a law allowing the government to suspend payments on its external debt marks the beginning of a default-like process,” Fitch commented.

It is noted that the agreement with the creditors is an “exchange of problematic debts”, as it concerns the write-off of the principal sum and interest of the loan, as well as the extension of the repayment terms.

The agency emphasized that the agreement with bondholders and the law on the suspension of debt payments are in line with the government’s efforts to implement the IMF’s four-year, $15.6B extended financing program, which involves debt restructuring with significant debt reduction to create fiscal space and restore debt sustainability.