Fitch Ratings has downgraded the city of Kyiv and the city of Kharkiv's Long-term foreign currency Issuer Default Ratings (IDR) to 'C' from 'CC,' reads a posting on the rating agency's website.

Key rating drivers

The Long-term foreign currency IDRs of the city of Kyiv and the city of Kharkiv are constrained by the sovereign, in line with Fitch's criteria of 'International Local and Regional Governments Rating Criteria outside the United States'. Under our criteria, a local or regional government can only be rated above the sovereign in exceptional circumstances.

The rating drivers of the cities' Long-term local currency IDRs are unaffected, leading to their affirmation.

Rating sensitivities

City of Kyiv

A sovereign downgrade or any adverse change leading to the partial or full containment of the city's ability and/or willingness to service its debt would lead to a downgrade.

Positive rating action is currently unlikely. However, a sovereign upgrade along with sustainable restoration of the city's financial flexibility leading to withdrawal of material downside credit risks would lead to an upgrade.

City of Kharkiv

A sovereign downgrade would lead to corresponding action on the city's IDRs. In the absence of a sovereign downgrade, significant deterioration of Kharkiv's credit profile could also lead to negative rating action.

A sovereign upgrade could be reflected by the city of Kharkiv's ratings provided that the city maintains a stable budgetary performance.

The rating actions are as follows:

City of Kyiv

- Long-term foreign currency IDRs: downgraded to 'C'

- Long-term local currency IDRs: affirmed at 'CC'

- Short-term foreign currency IDR: affirmed at 'C'

- Senior unsecured domestic bonds: affirmed at 'CC'

- Senior unsecured eurobonds: downgraded to 'C'

City of Kharkiv

- Long-term foreign currency IDRs: downgraded to 'C'

- Long-term local currency IDRs: affirmed at 'CCC'

- Short-term foreign currency IDR: affirmed at 'C'