Fitch downgrades Ukraine further into default zone over $20 billion debt agreement

(Reuters) - Fitch downgraded Ukraine's credit rating further into default territory at "C" from "CC" on Wednesday, citing a recently concluded in-principle agreement with a group of creditors to restructure $20 billion of international bonds.

A "C" rating indicates Fitch's view that a default or default-like process for Ukraine has begun.

On Monday, Ukraine said it had reached an agreement in principle with a group of creditors to restructure $20 billion of international bonds, bringing the war-torn country closer to an unprecedented debt rework.

The proposal provided a 37% nominal haircut on Ukraine's outstanding international bonds, saving Kyiv $11.4 billion in payments over the next three years.

"The reported agreement with external commercial creditors constitutes a distressed debt exchange (DDE) under its sovereign rating criteria," Fitch said, adding that it involves a material reduction in terms and extension of maturities.

Ukraine's finances are precarious as its 28-month war with Russia drags on. Russia's 2022 invasion decimated its economy, leaving it heavily reliant on money – and military aid – from international partners.

(Reporting by Aatrayee Chatterjee and Kanjyik Ghosh in Bengaluru; Editing by Sriraj Kalluvila and Leslie Adler)