The international credit rating agency S&P Global Ratings has downgraded Ukraine's long-term and short-term sovereign credit ratings in foreign currency from CC/C to SD/SD, indicating a selective default. The rating is expected to be upgraded once the debt restructuring is completed.
This downgrade follows Ukraine's missed coupon payment on its 2026 Eurobonds on August 1, according to the agency's announcement.
"We could also raise the ratings in the unlikely case that Ukraine were to resume payment on the defaulted bond instead of the debt exchange. Our analysis will incorporate the sovereign's post-restructuring credit factors, including the new terms and conditions of its external debt. We could raise the LC ratings if Ukraine's security environment and medium-term macroeconomic outlook improve," the agency stated.
S&P typically rates countries emerging from default in the CCC or B categories, depending on post-default credit factors, including new terms of state debt.
The proposed restructuring details include exchanging existing bonds for a series of new ones, which will involve a nominal debt write-off of 37%, waiver of interest payments, and extended maturity dates.
The agency's analysts noted that the debt restructuring is part of the government's efforts to alleviate the pressure related to external debt servicing and restore debt sustainability as part of an agreement with the IMF.
S&P mentioned that the restructuring parameters were approved by Ukraine's creditor group, including official creditors from G7 countries and members of the Paris Club. The creditor group had previously extended the payment deferral for official bilateral debt until the end of the IMF programme in 2027.
