S&P Global cut Ukraine's credit rating to "selective default" on Friday after the country failed to make a coupon payment on an existing bond as it restructures its debt.
The ratings agency cut Ukraine's long-term and short-term foreign currency (FC) sovereign credit ratings to SD/SD from CC/C to "reflect the missed payment on the coupon of Ukraine's 2026 Eurobond."
The move comes after Ukraine reached a preliminary agreement with a group of international creditors to restructure more than $20 billion in debt. The creditors agreed to write off more than a third of the nominal value of the debt owed them, saving the country $11.4 billion over the next three years.
Under the terms, the government achieved a 37% haircut on the nominal amount of the bonds.
The ratings agency said, however, that it could raise Ukraine's rating again soon.
"Upon the FC commercial debt restructuring taking effect, we could consider the default as cured and raise the rating from 'SD,'" the agency said. "We tend to rate most sovereigns emerging from default in the 'CCC' or 'B' categories depending on post-default credit factors, including the new terms of government debt."
S&P Global, which had a B rating for Ukraine before the Russian invasion of February 2022, said it expects Ukraine to take years to reach its pre-war GDP levels.
"If the economy started to recover, considering the toll the war has taken on Ukraine's economy, we do not expect real GDP to recover to its pre-war level in our forecast period through 2027," the agency said.
On July 22, Fitch also lowered its rating for Ukraine shortly after the preliminary agreement on debt restructuring was announced.
Fitch Ratings lowered the country's Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) rating to C from CC on July 24, reflecting its opinion that the haircut "marks the start of a default-like process."
