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Ukraine plummets to ‘selective default’
(MENAFN) S&P Global Ratings has downgraded Ukraine’s credit rating to ‘selective default’ following the country’s failure to make an international bond payment earlier this week. The downgrade comes as Ukraine grapples with a significant debt restructuring process aimed at avoiding a full default.
On Thursday, Ukrainian President Volodymyr Zelensky signed a law that temporarily halts payments on the country’s external debt liabilities, effective August 1 for a period of two months. This move is part of Ukraine’s broader strategy to negotiate a restructuring deal with international creditors to address its financial challenges. The missed payment concerns a USD34 million installment on Ukraine’s 2026 Eurobond, which is still within the contractual grace period. However, due to the government’s authorized suspension, S&P does not anticipate the payment will be made within the grace period, which spans 10 business days.
S&P Global Ratings has revised its rating on the 2026 Eurobond from ‘CC’ to ‘D’ to reflect the likelihood of default and has maintained a ‘CC’ rating on Ukraine’s other Eurobonds. The ratings adjustment follows recent developments in Ukraine’s debt negotiations, which have been ongoing as the country seeks to manage its nearly USD20 billion in international debt.
A preliminary restructuring deal with a committee of major bondholders was reached on July 22, just before the expiration of the grace period for coupon payments. The agreement involves a 37 percent nominal haircut on Ukraine’s outstanding international bonds, which will save the country approximately USD11.4 billion in payments over the next three years. In return, Ukraine is expected to issue new Eurobonds.
This downgrade by S&P follows a similar warning from Fitch Ratings, which last week downgraded Ukraine’s credit rating from ‘CC’ to ‘C’. Fitch’s downgrade reflects the imminent risk of default or a default-like process for the country.
This marks Ukraine’s second significant sovereign debt restructuring in the past decade. The country previously undertook a similar restructuring in 2015, which allowed it to temporarily suspend payments on its sovereign debt. The current situation underscores the ongoing financial strain faced by Ukraine as it navigates its debt crisis and seeks to stabilize its economy amidst broader geopolitical and financial uncertainties.
On Thursday, Ukrainian President Volodymyr Zelensky signed a law that temporarily halts payments on the country’s external debt liabilities, effective August 1 for a period of two months. This move is part of Ukraine’s broader strategy to negotiate a restructuring deal with international creditors to address its financial challenges. The missed payment concerns a USD34 million installment on Ukraine’s 2026 Eurobond, which is still within the contractual grace period. However, due to the government’s authorized suspension, S&P does not anticipate the payment will be made within the grace period, which spans 10 business days.
S&P Global Ratings has revised its rating on the 2026 Eurobond from ‘CC’ to ‘D’ to reflect the likelihood of default and has maintained a ‘CC’ rating on Ukraine’s other Eurobonds. The ratings adjustment follows recent developments in Ukraine’s debt negotiations, which have been ongoing as the country seeks to manage its nearly USD20 billion in international debt.
A preliminary restructuring deal with a committee of major bondholders was reached on July 22, just before the expiration of the grace period for coupon payments. The agreement involves a 37 percent nominal haircut on Ukraine’s outstanding international bonds, which will save the country approximately USD11.4 billion in payments over the next three years. In return, Ukraine is expected to issue new Eurobonds.
This downgrade by S&P follows a similar warning from Fitch Ratings, which last week downgraded Ukraine’s credit rating from ‘CC’ to ‘C’. Fitch’s downgrade reflects the imminent risk of default or a default-like process for the country.
This marks Ukraine’s second significant sovereign debt restructuring in the past decade. The country previously undertook a similar restructuring in 2015, which allowed it to temporarily suspend payments on its sovereign debt. The current situation underscores the ongoing financial strain faced by Ukraine as it navigates its debt crisis and seeks to stabilize its economy amidst broader geopolitical and financial uncertainties.
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