Ukraine downgraded to ‘selective default’
S&P Global Ratings has lowered Ukraine’s credit rating to ‘selective default’ after Kiev missed an international bond payment earlier this week as it seeks a major debt restructuring.
On Thursday, Vladimir Zelensky signed a law temporarily suspending payments on the country’s external debt liabilities for two months starting August 1 as it is currently trying to reach a restructuring agreement with international creditors in order to avoid default.
The US-based agency said the $34 million payment on Ukraine’s 2026 Eurobond is still in the grace period, but payments are not likely to be made given the government-authorized suspension.
“We do not expect the payment within the bond’s contractual grace period of 10 business days,” S&P said on Friday. The agency revised the rating on the 2026 Eurobond to ‘D’ from ‘CC’ and affirmed its ‘CC’ ratings on the other Eurobonds.
Ukraine has been negotiating with creditors a restructuring of its nearly $20 billion in international debt. A preliminary deal with a committee of its main bondholders was achieved on July 22, two weeks before the grace period for coupon payment expires.
The agreement provided a 37% nominal haircut on Ukraine’s outstanding international bonds, saving Kiev $11.4 billion in payments over the next three years. Ukraine will issue new Eurobonds in return.
Last week, another Western rating agency, Fitch, warned of an imminent Ukrainian default, announcing that it had further cut Kiev’s credit rating from ‘CC’ to ‘C’, which denotes that a country has entered default or is in a default-like process.
The sovereign debt restructuring represents Ukraine’s second reworking of its liabilities in the last ten years. A similar restructuring granting Kiev the right to stop payments on its sovereign debt was carried out in 2015.
