Ukrainian Railways ratings stay at restricted default as July bond repayment looms

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Ukrainian Railways default and bond

Highlights

Fitch affirms Ukrainian Railways' long-term issuer ratings at 'RD' and the USD1,055.1 million LPNs at 'D', citing ongoing restricted default after missed payments.
Fitch expects Ukrainian Railways will not redeem the USD703.2 million 8.25% notes due July 2026, highlighting limited cash and absent external refinancing.
Negative EBITDA of UAH141 million in 2025, falling cargo and passenger volumes, and rising costs underscore reliance on UAH13 billion tariff increases and UAH16 billion state support in 2026.

Fitch affirmation and restructuring outlook

As reported by Fitch Ratings, the agency has affirmed Ukrainian Railways' long-term foreign- and local-currency issuer default ratings at 'RD' and kept the senior unsecured USD1,055.1 million loan participation notes issued by Rail Capital Markets Plc at 'D'. The action reflects the company's continued restricted default status after missed coupon payments on the notes.

Fitch says it does not expect the company to redeem the USD703.2 million 8.25% notes due on 9 July 2026. The agency says unrestricted cash at end-May 2026 is far below the amount due, and refinancing options are not available because external funding is largely reserved for development capital spending.

Ukrainian Railways is discussing a broader restructuring with holders of the 2026 and 2028 notes. Fitch says that if the transaction is completed, it would likely treat it as a distressed debt exchange, then reassess the company's ratings based on the revised debt structure and assign ratings to any new instruments.

War pressure, liquidity strain and state support

Operating conditions remain difficult as the war on Ukrainian territory continues and attacks on railway infrastructure and rolling stock intensify over the last 12 months. Fitch says the company is unlikely to restore sustainable operations in the near term without stronger demand and improved pricing, even as it continues cost-cutting efforts.

The agency calculates that Ukrainian Railways posted negative EBITDA of UAH141 million for 2025, compared with UAH16.3 billion in 2024, while cargo volumes fell 8% and passenger volumes fell 7%. Costs, especially electricity and wages, rose, and Fitch says scheduled debt service for the rest of 2026, excluding the LPNs, still exceeds UAH2.5 billion.

The company continues to service other borrowings, including loans from the European Bank for Reconstruction and Development and the European Investment Bank, although noteholders object to that treatment. Fitch notes that waivers or partial waivers have been obtained on cross-default clauses tied to the LPN default.

Tariff policy and budget support remain central to any recovery in cash generation. Ukrainian Railways has asked the central government to raise cargo tariffs in 2026, estimating a net cash flow benefit of about UAH13 billion, while the government also plans UAH16 billion in 2026 budget support for passenger transport and is working on a law for a public service obligation compensation framework.

Our earlier article on KBRA’s affirmation of the MTA Hudson Rail Yards Trust Obligations outlined why the A- long-term rating and Stable Outlook were maintained despite ongoing development and market risks. We noted that low loan-to-value metrics under stress scenarios, a flexible amortization schedule, and requirements around replenishing the Interest Reserve Fund were key supports, while exposure to ground-lease tenant payments and construction delays remained central sensitivities.

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