Fitch downgrades Ukraine Railways', its LPN ratings after it missed coupon payments

MOSCOW. Feb 3 (Interfax) - Fitch Ratings has downgraded the Ukrainian national railway company JSC Ukrzaliznytsia's (UZ, Ukrainian Railways) Long-Term Issuer Default Rating (IDR) to 'RD' from 'C' and the long-term rating of its Loan-Participation Notes (LPNs) due in 2026 and 2028 to 'D' from 'C', Ukrainian media reported referring to the agency's statements.

"Fitch considers an actual failure to pay interest or principal when due and payable according to the terms and conditions of the rated obligation, including any applicable grace period, as a default (denoted by a 'Restricted Default' (RD) or 'D' rating)," Fitch said in a statement, referring to the fact that the company missed coupon payments due on January 9 and 15, 2026.

Earlier in January 2026, Fitch Ratings had downgraded UZ's and its LPN ratings to 'C' from 'CC' after the company announced it would not pay $45 million in coupon payments and would launch a comprehensive restructuring of its Eurobond obligations.

UZ said at the time that its own funds were not enough to finance its operating activities. The company explored external financing sources, but such funding is generally provided only for critical capital expenditures. Fitch said it currently had no information on possible terms and timeframes for restructuring UZ's LPNs.

As reported, in January 2025, UZ capitalized coupon payments on $108.28 million 8.25% LPNs due in 2026 and on $51.9 million 7.875% LPNs due in 2028, which were deferred as a result of the restructuring in 2022. This increased the volumes of these issues to $703.2 million and $351.9 million, respectively.

UZ said in its presentation in June 2025 that it accounted for 61% of freight and some 25% of passenger transportation domestically. The company had 180,000 employees, making it the biggest employer in Ukraine. It operated over 1,400 stations and a substantial fleet of locomotives (2,000), freight cars (33,700), and passenger cars (1,700).

In January-September 2025, UZ's income from routine activities was down 15.4% to UAH 66.03 billion compared to the same period in 2024, and it posted a net loss of UAH 7.32 billion against a net profit of UAH 1.66 billion in January-September 2024. Its income from freight and mail transportation in the first nine months of 2025 decreased by 19% to UAH 50.1 billion, and income from other services decreased by 14.7%, to UAH 6.36 billion.