09:59 29.09.2015

S&P raises Ukrainian PrivatBank ratings to 'CC/C' on completion of debt restructuring

3 min read
S&P raises Ukrainian PrivatBank ratings to 'CC/C' on completion of debt restructuring

Standard & Poor's Ratings Services on September 28 raised its long-term counterparty credit rating on Ukraine-based PrivatBank JSC to 'CC' from 'SD' and its short-term counterparty credit rating to 'C' from 'SD'.

The outlook is negative, S&P said in a statement.

The upgrade follows PrivatBank's agreement with the creditors of its $200 million bonds due September 23, 2015, to extend their maturity to January 15, 2016 (extendable to 2018 subject to a restructuring of subordinated debt due February 2016), and change the interest rate to 10.25% from 9.375%. On September 23, 2015, the bank paid a coupon to 2015 bondholders, in accordance with the supplement loan agreement.

"We base the 'CC/C' ratings on our expectations that nonpayment on the banks $150 million subordinated bonds due February 2016 and the $200 million bonds with maturities extended to January 2016 is a virtual certainty," S&P said.

In July 2015, PrivatBank initiated the extension of its two eurobond maturities due September 2015 and February 2016 in light of the very difficult economic conditions in Ukraine. The extension request is also in line with the National Bank of Ukraine's requirements to increase its capitalization and ease pressure on Ukraine's currency market.

The bank is currently in negotiations with bondholders to extend the maturity of the bonds due February 2016, which S&P would regard as a distressed exchange offer and tantamount to a selective default, as per S&P criteria. "This is based on our understanding that the affected bondholders would not receive the full value of the bonds on time as originally agreed. We expect that the nonpayment will be a selective default ('SD')–-versus a general default--and that PrivatBank would continue to honor its other obligations as they come due, especially to its depositors within the limits allowed by the National Bank of Ukraine. However, we are continuing to monitor the situation in case a general default occurs," S&P experts said.

"Our assessment of PrivatBank's stand-alone credit profile (SACP) stands unchanged at 'ccc', reflecting the bank's "adequate" business position, "weak" capital and earnings, "adequate" risk position, and "weak" funding and liquidity profile. The bank continues to rely on the National Bank of Ukraine for liquidity assistance to address continuing deposit outflows," S&P said.

S&P said it does not rate any debt issued by PrivatBank.

The negative outlook on PrivatBank reflects S&P's view that nonpayment on senior unsecured bonds due January 2016 and subordinated bonds due February 2016 is a virtual certainty.

S&P says it expects to view the forthcoming distressed exchange offer as a de facto default with respect to the securities involved and the rating agency would likely therefore lower S&P ratings on PrivatBank to 'SD'.

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