The rating agencies S&P and Fitch downgraded Ukraine on Friday, now only one notch from default, after the announcement of a moratorium on its external debt obtained Wednesday from its international creditors.
S&P thus downgraded the ratings of the long and short-term debt in foreign currencies, from CC/C to SD (“selective default”).
“Given the announced terms and conditions of the restructuring, and in accordance with our criteria, we view this transaction as […] equivalent to default,” S&P said in a statement.
Ukraine has obtained from its international creditors a two-year moratorium on its external debt, estimated at 20 billion dollars.
Fitch, for its part, downgraded its long-term debt from C to RD (“restricted default”).
Neither of the two agencies, however, accompanied this rating, given its character, with an outlook indicating whether it plans to raise or lower it, or maintain it.
A country is considered in default of payment when it is unable to honor its financial commitments to its creditors, which may be States, financial institutions (International Monetary Fund, World Bank, etc.) or investors on the financial markets . The default is qualified as partial when the State does not reimburse part of its obligations.
A group of Western creditors including France, the United States, Germany, Japan and the United Kingdom had agreed on July 20 to a postponement of interest payments on the Ukrainian debt after a request from Kyiv, urging other bondholders to do the same.
Ukraine’s economy has collapsed since the start of the war with Russia launched on February 24 and could see its GDP plunge by 45% this year, according to the latest World Bank estimates from June.
Measures to defer Ukraine’s payment of its bonds could save it at least $3 billion over two years, according to calculations by the Bloomberg agency.