"The government of Ukraine today announced that it had reached an agreement with a representative group of creditors for a debt exchange that would result in a 20% reduction in principal and a postponement of principal repayments on $18 billion of government and government-guaranteed Eurobonds," Fitch said in a statement.
"Fitch considers that this represents a Distressed Debt Exchange (DDE) under its criteria that results in material losses to bondholders and is being conducted in order to avoid default," the statement said.
The rating agency said it assumed that the announced restructuring would be implemented.
A year-long military conflict in eastern Ukraine, which began when Kiev launched an operation against independence supporters, has resulted in an economic crisis, leaving Ukraine on the verge of a default. The country’s currency, the hryvnia, has dropped significantly in value since 2014.
Ukraine has become increasingly reliant on outside help, with its major lenders including the International Monetary Fund, the World Bank and several countries.
Ukraine’s total state debt stands at $70 billion, of which some $40 billion is owed to international money lenders.