The American rating agency S&P Global has lowered Ukraine's credit rating to the level of “selective default”. The reason is the lack of payments on bonds by Ukraine. This was reported by the press service of the agency.
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The government of Ukraine has decided to suspend payments on bonds for restructuring. To this end, the government failed to make the coupon payment on the 2026 Eurobonds, which was due on 1 August 2024.
S&P also does not expect to receive the payment within the ten business days stipulated by the agreement.
“We have lowered our long-term and short-term foreign currency (FC) ratings of Ukraine to SD/SD (selective default) from CC. We have also lowered the rating of the 2026 Eurobonds from CC to D (default),” the agency said in a statement.
At the same time, S&P affirmed the sovereign ratings in local currency (LC) CCC+/C and uaBB on the national scale.
“We understand that Ukraine's hryvnia-denominated public debt is not subject to restructuring. The LC rating outlook is stable,” the agency added.
Forecast
S&P expects an upgrade of Ukraine's long-term foreign currency rating after the planned debt swap is completed.
The restructuring of Eurobonds involves writing off 37% of the principal amount, reducing interest and extending the maturity dates.
The agency also believes that Ukraine's economy will not recover to pre-war levels within the forecast period until 2027.
Let us recall
This week, on July 31, Ukrainian President Volodymyr Zelensky signed Law No. 11396, allowing the government to suspend payments on external debt until October 1.
The Cabinet of Ministers adopted the corresponding bill on July 18.
The Ministry of Finance wrote that Ukraine managed to reach an agreement in principle with the Committee of Ukrainian Eurobond Holders on debt restructuring.
The restructuring agreement will provide for the existing Eurobonds to be exchanged for a package of new Eurobonds with a nominal reduction in the cost of debt by 37% at the initial stage and a reduction in the net present value of the debt by about 60%.
After the restructuring is completed, the maturity date of the Eurobonds will be extended: the first repayment in the amount of $1.172 billion will take place in 2029. By comparison, without the restructuring, the principal amount of $9.381 billion (excluding capitalized interest) would have been due between 2024 and 2029.