S&P placed Ukraine's 'B+/B' Ratings on CreditWatch with negative implication

/Standard & Poor's, London, October 15, 08/ - Standard & Poor's Ratings Services placed the following ratings on on CreditWatch with negative implications: its 'B+/B' foreign currency and 'BB-/B' local currency sovereign credit ratings on its global scale; and its 'uaAA' ratings on its national scale. A resolution of the CreditWatch action is likely this month pending further clarification of the government's strategy in addressing the intensifying stresses in Ukraine's financial sector, which could require capital injections from the government. We are in the process of assessing these potential fiscal costs and the impact of weakened growth prospects on the budgetary position of the government. "The CreditWatch placements reflect our concerns over the impact of a deteriorating economic situation and associated exchange-rate depreciation on the country's financial sector asset quality, especially in light of its high level of private sector foreign currency borrowing, equivalent to 35% of GDP. The current account deficit increased sixfold in U.S. dollar terms during the first half of 2008 to $6.8 billion (an estimated 7% of GDP), but this figure is likely to shrink markedly during the remainder of 2008 and into 2009 as Ukraine faces a sudden stop in external financing," said Standard & Poor's credit analyst Frank Gill. High short-term financing needs will remain - Ukraine's gross external financing requirements (current account balance, amortization of long-term external debt, and stock of short-term external debt) will be 147% of international reserves over the next 12 months. A reversal in terms of trade is also underway, complicating the outlook for growth in the midst of an evolving electoral cycle. The Ukrainian government is in talks with the International Monetary Fund to negotiate an arrangement that could provide long-term support for its economy. "We expect to resolve the CreditWatch placement this month, as terms of the IMF deal and any associated foreign currency funding become clear," added Mr. Gill. For more information: Frank Gill, London, 44 (207) 176 -71-29 frank_gill@standardandpoors.com Kai Stukenbrock, Frankfurt, 49 (69) 33-99-92-47 kai_stukenbrock@standardandpoors.com [2008-10-16]