The international rating agency Fitch Ratings has upgraded Private Joint Stock Company National Power Company Ukrenergo's (Ukrenergo) state- guaranteed notes' senior unsecured rating to 'CC' from 'C' following the restructuring of its $825 million bonds.

"The notes' Recovery Rating remains unchanged at 'RR4.' The upgrade follows the restructuring of Ukraine's debt. Fitch has also assigned Ukrenergo a 'CC' Long-Term Issuer Default Rating (IDR)," the agency said on its website.

According to Fitch, the ratings reflect the strong links of Ukrenergo with Ukraine under Fitch's Government-Related Entities (GRE) Criteria, with Ukraine being also the guarantor of almost all of Ukrenergo's debt.

The change of terms has improved Ukrenergo's liquidity, which however remains tight given remaining debt service and stressed operating cash flows, the press release said.

Fitch views tight liquidity constraining Ukrenergo's ratings and its Standalone Credit Profile (SCP) at CC and 'cc,' respectively.

According to the agency, Ukrenergo's operations have been severely hit by Russia's invasion of Ukraine. They expect electricity consumption in the next two years to remain significantly lower (30%) than in pre-war times, limiting Ukrenergo's revenue from transmission and dispatch. They expect lower collection of trade receivables in 2022-2023, and also accumulation of trade payables, as the company prioritises crucial spending items over others.

In addition, the requirement to keep the electricity network operational is absorbing Ukrenergo's available resources and weighing on its liquidity.

As reported, on July 20, Ukraine proposed bondholders to defer from August 1 all payments on them and maturities for two years, while maintaining the current rates of return. At the end of this period, interest can be paid immediately or capitalized.