(MENAFN- The Peninsula) P Ratings agency Fitch has lowered its rating for Ukraine saying the debt restructuring deal Kiev struck with a group of creditors was tantamount to default.
Fitch lowered Ukraine's rating of long-term public debt from "CC" to "C," after the deal was announced Thursday because it led to major losses for the bondholders.
"Fitch considers that this represents a Distressed Debt Exchange (DDE) under its criteria that results in material losses to bondholders and is being conducted in order to avoid default," the agency said in a statement released late Thursday.
The accord struck between Kiev and Franklin Templeton and three other US financial groups calls for a 20 percent "haircut" to the face value of the bonds they hold - nearly half of the $19bn (¤16.8bn) in commercial debt under review.
Thursday's agreement saves Ukraine $11.5bn but is still short of the target set by the International Monetary Fund.
While the "haircut" was far less than the 40 percent initially sought by Kiev, the compromise deal with creditors was vital to Ukraine's efforts to secure $15.3bn in savings on total foreign debt over the coming four years.
Restructuring was a mandatory part of a broader $40 billion global rescue package that the IMF patched together at the start of the year.
Though the default-averting accord with lenders allows Ukraine continued access to international credit markets, Fitch's downgrade is likely to increase costs of additional borrowing.
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