On July 10, Russian, Ukrainian, and separatist media falsely reported about the impending defaults of Ukraine’s two largest banks – Privatbank and Oshchadbank.
RIA Novosti, Russkaya Vesna, RBK-Ukraine, Vzgliad, Espreso, Weekly Mirror and many others published articles under such headlines as “Default of Privatbank and Oshchadbank Is Almost Inevitable – Fitch” and “Fitch States Inevitability of Default of Privatbank and Oshchadbank.”
These sites basically wrote verbatim texts of an article originally published by the Russian news agency RIA Novosti, which reported: “The downgrade of the Long-term foreign currency IDRs reflects Fitch’s view that defaults of the two banks on Eurobonds are now almost inevitable.”
The statement on the Fitch site, however, differs with what RIA Novosti reports: “The downgrade of the Long-term foreign currency IDRs reflects Fitch’s view that defaults by the two banks on certain senior debt obligations (Eurobonds) are now almost inevitable.”
As we can see, the inevitable default does not threaten the banks, but certain senior debt obligations of these banks. Fitch outlines them: Privat’s $200 million Eurobond due in September 2015, and Oschadbank’s $700 million Eurobond due in March 2016 and $500 million Eurobond due in March 2018. The banks have initiated talks on the restructuring of these debts.
Fitch adds that it “expects to review both banks’ VRs, IDRs and debt ratings once the debt exchanges are completed and sufficient information is on the banks’ credit profiles. However, the ratings will likely remain low, given high country risks and Ukraine’s ‘CCC’ Country Ceiling.”
As for the “C” ratings assigned to the banks by Fitch: these point to the probability of default, but not to its inevitability.
