Major rating agencies declare Ukraine in default

Global rating agencies S&P and Fitch have lowered Ukraine’s foreign currency ratings to ‘selective default’ and ‘restricted default’, respectively, as the country’s latest debt restructuring is seen as distressed. 

Earlier this week, state-owned companies Ukrenergo and Ukravtodor requested a two-year freeze on payments on almost $20 billion in international bonds. The country’s overseas creditors agreed to suspend interest payments and postpone the maturity date of the bonds by two years. 

This is expected to save Ukraine about $6 billion on payments, Ukrainian Prime Minister Denis Shmygal said, commenting on the move. 

S&P reduced Ukraine’s foreign currency rating to ‘SD/SD’ – meaning selective default – from ‘CC/C’. 

“Given the announced terms and conditions of the restructuring, and in line with our criteria, we view the transaction as distressed and tantamount to default,” the agency said. 

Meanwhile, Fitch cut the country’s long-term foreign currency rating to ‘RD’ (restricted default) from ‘C’, deeming the deferral of debt payments to be a distressed debt exchange. 

S&P also said it expects the macroeconomic and fiscal stress caused by Russia’s military operation to weaken Kiev’s ability to service its local-currency debt. It therefore downgraded Ukraine’s domestic currency rating to ‘CCC+/C’, from ‘B-/B’. Fitch, meanwhile, kept the country's domestic currency rating at ‘CCC-‘.

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