S&P downgrades Ukraine's sovereign debt rating to partial default amid debt restructuring efforts

(MENAFN) On Friday, Standard & Poor's downgraded Ukraine's long-term sovereign debt rating to "SD" (selective default) following Kiev's failure to pay a portion of its euro-denominated bonds that matured on Thursday. This downgrade comes as Ukraine announced its intention to initiate a formal restructuring of some of its euro-denominated bonds through an exchange offer. The government decided to halt payments on the bonds in question ahead of the restructuring process, resulting in the missed payment on the tranche of European bonds that matured.

Standard & Poor's clarified in its statement that it does not anticipate repayment within the contractual grace period of 10 business days, underscoring the severity of Ukraine's financial situation. On July 22, Ukraine revealed that it had reached a preliminary agreement to restructure a significant portion of its debt, totaling USD20 billion. The Ukrainian Finance Ministry confirmed that an "agreement in principle" was reached with a consortium of international private sector creditors to restructure 13 series of euro-denominated bonds. This restructuring is expected to provide substantial fiscal relief, saving the state treasury USD11.4 billion over the next three years and USD22.75 billion until 2033.

Standard & Poor's emphasized that it would consider upgrading Ukraine's rating if the country successfully completes its debt restructuring or resumes payments on the defaulted bonds instead of proceeding with the debt exchange. This situation highlights the ongoing economic challenges faced by Ukraine as it navigates through a complex debt restructuring process amid broader fiscal pressures. The downgrade to selective default signals a critical juncture for Ukraine, which must now focus on finalizing its debt restructuring plans to stabilize its financial standing and restore investor confidence.

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