Moody's Public Sector Europe has today upgraded the City of Kyiv's issuer rating to Caa2 from Caa3; the rating's outlook remains positive.

Moody's said in a press release, the improvement, reflected in the upgrade of Kyiv's baseline credit assessment (BCA) to caa2 from caa3, stemmed from an expanded revenue base while the city contains growth in expenses.

The upgrade of Kyiv's issuer rating also reflects the city's successful completion of the exchange of $101 million of the remaining portion of $250 million Eurobond that was in default since 2015 for new loan participation notes due in 2022, which significantly relieves financial pressure from the city's budget.

As reported, Kyiv on November 23, 2015, offered to the holders of their eurobonds their exchange for the eurobonds of Ukraine with redemption in 2019-2020 and government derivatives. Per one eurobond with a nominal value of $1,000 two sovereign eurobonds with redemption in 2019 and 2020 were offered, each with a nominal value of $375 and a rate of 7.75% per annum and government derivatives with a conditional value of $250. The interest accrued on the bonds was planned to be capitalized and added to the principal amount of the new bonds.

The government of Ukraine on December 18, 2015, as part of the restructuring, allowed the transfer of Kyiv's debt on eurobonds 2015 for $117.394 million and eurobonds 2016 for $233.672 million into public debt.

Restructuring of eurobonds 2015 was supported by 59.51% of their holders, and eurobonds 2016 - by 90.9%. According to a source at Bloomberg, the 2015 eurobonds offer was rejected by Franklin Templeton Inv Mgmt Ltd., based in London, which owned 32% of the 2015 eurobonds. After that, according to the available information, there were negotiations with this creditor.

The restructuring mechanism for eurobonds 2015 provided that the papers that will not be converted will remain unpaid due to the moratorium imposed by Kyiv on making payments on foreign debts, and the possibility of transferring them to government securities expired in 2015.

Kyiv on September 4, 2018 completed the restructuring of outstanding debt on foreign borrowings by exchanging eurobonds with a yield of 8% and repayment in 2015 (eurobonds 2015) with a total nominal amount of $101.149 million for new bonds with a yield of 7.5% and repayment on December 15, 2022.