Moody's downgrades Alfa Bank

Moody's Investors Service said it downgrades Alfa Bank Ukraine's local-currency deposit rating to B3 from Ba3, foreign-currency deposit rating to B3 from B2, local- and foreign-currency senior unsecured debt ratings to B3 from Ba3, and its national scale rating to Baa3.ua from Aa1.ua. Ratings remain on review for further downgrade.

The action is in response to the announcement on May 5 that Alfa Bank Ukraine defaulted on its $100 million eurobonds due on May 4. The five-day grace period to make the payment expires on May 11.

Moody's said the default resulted from the bank's inability to acquire sufficient amount of dollar funds in time on the local interbank market due to foreign-currency restrictions and low market liquidity. Alfa Bank expects to be able to purchase sufficient dollars to repay the eurobonds before the grace period expires, according to the agency.

The agency said that while it acknowledges the difficulties caused by foreign-currency restrictions, it cautions on Alfa Bank Ukraine's heightened liquidity risks caused by inefficient liquidity management and substantial upcoming market debt repayments.

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