This looks like a bureaucratic paradox: Fitch Ratings initially downgraded Naftogaz's rating to RD — "restricted default" — and literally in the same statement returned it back to CC. The company did not go bankrupt and continues to operate. It is simply a formal way of recording any debt restructuring whose terms are worse for creditors than the original ones. In the case of Naftogaz, we are talking about eurobonds worth $0.6 billion and 0.7 billion euros issued through Kondor Finance.
A practical conclusion for those monitoring the financial condition of the state company: a technical default on the securities is not a collapse, but a way to avoid a real one. Fitch directly acknowledges that the restructuring allowed the company to avoid the probability of complete default by extending repayment terms. Therefore, "default" in this news should be read as "debt reissuance on worse terms," not as a suspension of payments.
Why the rating did not rise above CC
The main reason is not the debts themselves, but liquidity. Fitch points to Naftogaz's weak ability to generate funds for timely servicing of obligations at a time when Russian strikes on gas infrastructure force the company to significantly increase gas imports — and this is additional expenses precisely when domestic production is under attack.
The agency separately highlights a specific risk: a payment of 94 million euros in 2027 for the euro portion of the debt. How critical the situation is will be demonstrated by this very payment — if Naftogaz services it without delays amid continued shelling, this will be a signal that the company has stabilized operational flows, rather than simply postponing the problem for two years.
Debt is growing, but not all of it is equally dangerous
Naftogaz's bank borrowing increased over the year from 106 billion hryvnias to 175 billion hryvnias. However, this growth is largely related to loans from the EBRD and the European Investment Bank — that is, institutional financing on preferential terms, rather than market loans at high interest rates. To assess real risk, it is important to distinguish between these two types of debt: support from international financial institutions is not the same as commercial eurobonds, for which a technical default has already occurred.
Fitch also takes into account Naftogaz's status as the country's largest mining company with state support — this factor is what prevented the rating from falling further, despite all operational problems.
The extension of eurobond repayment terms, Fitch directly calls a positive factor for the company's credit profile — despite the fact that formally this is what became the reason for the "default" entry in the rating history.
A similar story with Vodafone Ukraine, whose Fitch rating was downgraded due to risks of repaying eurobonds worth $280 million, shows: Ukrainian corporate foreign currency debt during the war is assessed by agencies primarily through the prism of infrastructure risks, rather than the business model as such. The question for the next two years is whether Naftogaz will be able to make the 2027 payment without another round of restructuring, or whether Russian strikes on the gas system will make a new technical default inevitable.
