Fitch Affirms Naftogaz Ukrainy’s CCC Rating

December 19, 2013

Fitch Ratings on December 18 affirmed NJSC Naftogaz of Ukraine's (Naftogaz) Long-term foreign currency Issuer Default Rating (IDR) at 'CCC' and its USD1,595m state-guaranteed notes maturing in September 2014 at 'B-'.

Naftogaz's ratings continue to reflect our assessment that default is a real possibility due to the continued weakness of the company's business and financial profiles, and its exposure to political risks. The political and economic environment in Ukraine continues to evolve rapidly, amid on-going mass protests and negotiations with both EU and Russia regarding economic cooperation and financial aid.

While in principle we view positively the 35 per cent gas price reduction to USD269 per thousand cubic meters (mcm) that Ukraine and Russia announced on 17 December 2013, we will need to analyse both the details of the deal and the extent to which Naftogaz will benefit from it before forming a firmer view. We consider that timely financial support from the government of Ukraine (B-/Negative), Naftogaz's sole shareholder, remains critical for its solvency, and we believe that the company is likely to default without such support.

Source: Fitch Press Office, 2013