Fitch Ratings has assigned Kondor Finance plc's proposed loan participation notes (LPNs) an expected senior unsecured 'B-(EXP)' rating and Recovery Rating (RR) of 'RR4.'

According to a press release of Fitch published on November 2, the LPNs will be issued by Kondor Finance (the U.K.) on a limited recourse basis for the sole purpose of funding a loan to NJSC Naftogaz of Ukraine (Naftogaz, B-/Stable).

Fitch aligned Naftogaz's rating with that of Ukraine under Fitch's Government Related Entity (GRE) Rating Criteria.

Fitch's key assumptions within its rating case for the issuer are the following:

- 9% increase in domestic gas prices in 2019-2020, below management expectations,

- UAH/USD exchange rate of 27.4 for 2018, 30.7 for 2019 and 32.3 for 2020,

- Unbundling of gas transit and gas storage from 2020,

- Dividends of about UAH 25 billion per year on average in 2018-2021,

- No compensation from the state for PSO regime or for expected unbundling,

- No cash received from Gazprom arbitration award.

"Naftogaz does not expect this unbundling to take place until 2020, after the current gas transit contract with Gazprom expires, which is also our assumption. Naftogaz expects that Ukrtransgaz PJSC, which handles gas transit, will remain its subsidiary until then and will pay dividends to the parent," Fitch said.

As reported, Naftogaz Ukrainy will hold a series of meetings with investors in the United States and London beginning on November 5, after which it plans to place five-year dollar-denominated LPNs.