Fitch Ratings has downgraded Ukraine-based DTEK Energy B.V.'s (DTEK) Long-term Issuer Default Rating (IDR) to 'RD' (Restricted Default) from 'C', as Fitch understands from management that the company is in the payment default under several bank loans due to uncured expiry of the grace period on some bank debt, Fitch said on Thursday.

DTEK told Interfax-Ukraine that the company continues the negotiations on debt restructuring to foreign creditors with the involvement of one of the leading international consultants – Rotschild.

"The company is in permanent dialog with eurobond holders and bank-creditors. DTEK Energo is holding talks aimed at balancing the financial possibilities of the company to service credits. We hope to finish the negotiations in 2016," the company said in a press release.

DTEK managers are doing their best to increase the company's efficiency in the conditions of the unfavorable economic situation in Ukraine.

"This does not allow business to refinance loans, forces to look for solutions to restructure debts and hope for understanding and support of investors," Head of the corporate finance department at DTEK Dmytro Fedotov.

The company said that in H1 2015 it exchanged $200 million eurobonds to news $160 million bonds that will mature in March 2018. In H2 2015, the company hired Rothschild and Latham & Watkins to organize the debt restructuring process.

Fitch said that following a possible financial restructuring and once sufficient information is available, the 'RD' rating will be revised to reflect the appropriate IDR for the issuer's post-restructuring capital structure, risk profile and prospects in accordance with relevant criteria.

Fitch understands from the company that the grace period under most of DTEK's bank loan installments with a total principal amount of UAH 14.3 billion ($528 million) due in end-February 2016 has passed. The default on final bank loan maturities is quite close to the $50 million threshold under eurobond cross-default clause, and Fitch expects it might be breached in the coming months.

Fitch said that the company's cash position of UAH 937 million ($37 million) at 1 February 2016 was well below its short-term maturities of UAH 25 billion ($997 million) due in 2016.

DTEK continues to be exposed to high foreign currency fluctuations risk, as most of its debt is denominated in foreign currencies, i.e. U.S. dollar (58.2% of total debt at end-2015), euro (19%), rouble (17.6%). This contrasts with 6% of its revenue in U.S. dollar in 2015, while most of its remaining revenue is denominated in hryvnia.

DTEK was established in 2005 to manage the energy assets of the System Capital Management group, owned by businessman Rinat Akhmetov. DTEK is a vertically integrated company involved in the production and enrichment of coal, and the generation and sale of electricity.