KYIV

Fitch Ratings has revised the outlook on JSC Ukrainian Railway’s (UR), the country’s railway state operator, long-term Issuer Default Ratings (IDRs) to Stable from Positive and affirmed the IDRs at ‘B’.

Ukrainian Railway is Ukraine’s integrated railway group with core operations in the domestic freight segment. It owns 11,481 grain-hopper railcars which make the company the largest rail logistics operator.

The rating actions followed the revision of Ukraine’s outlook to Stable from Positive earlier this month.

“This has a direct impact on UR’s outlook as Fitch considers it a government-related entity (GRE) of Ukraine based on Fitch’s GRE rating criteria,” the agency said in a report.

“The affirmation reflects our unchanged assessment of the strength of linkage with the Ukrainian government and the government’s incentive to support the UR since our last review on 20 December 2021.”

Fitch said it had assessed UR’s Standalone Credit Profile (SCP) at ‘b-‘ under its Public Sector, Revenue-Supported Entities Rating Criteria, which factors in the company’s ‘Weaker’ assessment for revenue defensibility, combined with a ‘Midrange’ assessment for operating risk and ‘Weaker’ assessment for the financial profile.

Based on this assessment Fitch applied a top-down approach under its GRE Criteria, which combined with UR’s SCP assessment of ‘b-‘ (fewer than three notches away from the government’s rating), leads to rating equalisation with the Ukraine sovereign IDR.

In July 2021, Ukrainian Railways placed five-year Eurobonds worth $300 million at 7.875 percent per year. J.P. Morgan and Dragon Capital acted as advisors and bookrunners of the issue. The issuer was Rail Capital Markets Plc.

The company said that investors showed strong interest – demand was twice as much as the company’s supply, tickets for financing were received from over 70 investors, predominantly from the UK and Switzerland.

Markets analysts said that the yield substantially exceeded the 7 percent range that they had expected before the issue.

The company used funds to service the state debt and repay a loan from Ukraine’s Sberbank and free up the liquidity for operating purposes.

Standard & Poor’s in April last year downgraded the long-term credit rating of the UR to “CCC” from “B-” due to possible problems with debt servicing.