S&P downgrades Ukraine, 'virtually certain' default

S&P lowers Ukraine’s rating, “almost certain”


Financial rating agency S&P sharply downgraded Ukraine's debt rating on Friday, saying the agreement reached by several Western countries to spread out debt payments amounted to a “virtually certain” default. 

“Ukraine has asked its foreign creditors to defer payments on all external debt for 24 months,” S& P in a press release.

“Following this request, we believe that a default on sovereign debt in foreign currencies is a virtual certainty”, specifies the rating agency.

The long-term rating in foreign currencies of the Ukraine was downgraded drastically, by three notches, from CCC+ to CC.

A group of Western creditors, including France, the United States, Germany, Japan and the United Kingdom , agreed on July 20 to a postponement of interest payments on Ukraine's debt after a request from kyiv, urging other Ukrainian bondholders to do the same.

Negative Outlook

S&P's rating was given a negative outlook reflecting the agency's view “that Ukraine is likely to implement its debt restructuring”, which would be considered “a default”, adds S&P.

The agency also highlights “the high risks to Ukraine's commercial debt service payments, given the government's debt restructuring plans, which stem from pressures related to the economy, balance of payments and the budget for the war with Russia”.

In the pessimistic scenario, the rating could be lowered further and change to “SD”, or “Selective Default” (“partial default” ), last notch before default (“D”).

This could happen “if Ukraine implements what we consider to be a disorderly debt restructuring, or if the government fails to make payments on its foreign currency obligations”, details the agency.


In the optimistic scenario, however, a rating upgrade could be considered “if Ukraine's security environment and medium-term macroeconomic prospects improve”.

Refunds suspended

The agreement signed on July 20 by the group of Western creditors provides for the suspension of Ukrainian debt service from August 1 and until the end of 2023, at least, “with the possibility of an additional year”. p>

The Ukrainian economy has collapsed since the start of the war and could see its GDP plunge by 45% this year, according to World Bank estimates published in June.

In In this context of exceptional crisis, kyiv had asked its creditors to defer payment, indicating that it wanted to give priority to “currency resources for priority expenditure related to the war”.

The measures for deferring the payment of the Ukraine on its bonds could save it at least $3 billion over two years, according to calculations by the Bloomberg agency.

S&P had already downgraded Ukraine's rating. Ukraine on May 27 and also assigned it a negative outlook, due to “the larger fallout of the Russian military attack,” and said he expected “a prolonged Russian-Ukrainian military conflict.”

Russia invaded Ukraine on February 24.