S&P yesterday raised the long-term issuer credit rating of the capital city of Kiev to B- from CC, and the outlook is stable. S&P said that, contrary to its expectations, Kiev redeemed UAH1.9bn (USD75mn) of domestic bonds due on Dec 6 ahead of schedule. S&P predicted that Kiev’s ‘absence of commercial debt and sound budgetary performance will counterbalance weaknesses of its financial management and limited access to capital markets’. S&P noted that Kiev’s economy is well diversified and Ukraine’s wealthiest.
We recall that S&P and Fitch in September downgraded Kiev to CC, predicting a default after Kiev’s decision to extend the maturity of the UAH1.9bn bonds by 360 days. However, in early October the city council decided to redeem the bonds ahead of schedule, at the expense of the city budget revenue which had been UAH3.5bn higher than expected in January-August.