International rating agency Fitch Ratings raised the long-term default ratings of the issuer Ukrzaliznytsia (UZ) and its $894.9M in Eurobonds from C to CC. Despite a high probability of default, analysts do not consider it inevitable.
Fitch believes that the company’s potential default will negatively affect the state’s reputation, but in wartime it will not affect access to international financing. The company’s main capital investment needs are to conduct repairs, update aging rolling stock, and improve war-damaged infrastructure.
The agency notes that UZ’s available funds are primarily intended for capital expenditures, not for improving liquidity. The company is raising €200M in financing from the EBRD and other loans, which will help cover capital investment needs for 2024 but will create challenges in the medium term.
Despite a net profit in 2023, the company forecasts a loss in 2024 due to slower growth in sales versus expenses.