Fitch Ratings has placed JSC Ukrzaliznytsia (Ukrainian Railway) Long-Term Issuer Default Rating (IDR) and the senior unsecured debt ratings of the issuer and its SPVs (special purpose vehicles) on Rating Watch Negative (RWN).

The rating action reflects the analysts' view of the company's tightened immediate liquidity position not fully offsetting debt servicing in 2021, with uncertainty about the pace of economic recovery after the coronavirus pandemic, Fitch Ratings reported.

Read alsoBusiness community expects further reform of rail transport market – EBAThe RWN reflects the company's worsened liquidity position, which Fitch assess as Weaker.

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Ukrzaliznytsia's 2021 debt amortisation schedule includes repayments of up to UAH 5.690 million in the remaining three quarters of 2021, with UAH3.225 million maturing on May 30, which materially pressures its already weakened liquidity position.

As of end-April 2021, Ukrzaliznytsia's liquidity coverage ratio (available undrawn lines of credit and unrestricted cash/scheduled repayments) was less than 1x.

Ukrzaliznytsia's immediate liquidity position, Fitch stresses, is insufficient to offset expected repayments of a local bank loan (US$116 million or equivalent UAH 3.225 million) maturing on May 30.

The company's available immediate liquidity (as of April 26, 2021) is UAH 3.130 million.

The company has been affected by the coronavirus pandemic shock to the economy, including an estimated Ukrainian GDP contraction of 4.2% in 2020, containment measures, and a weaker currency.

Fitch projects the economy to rebound in 2021 with growth of up to 4.1%, but there are material downside risks to the forecasts, given the uncertainty around the duration of the pandemic.

Accordingly, Ukrzaliznytsia's main revenue driver – the freight segment – has been affected in 2020 with significant downside risk to the pace of the recovery in 2021.