Fitch and S&P cite Ukraine as being in default

Global rating agencies S&P and Fitch downgraded Ukraine’s foreign currency ratings to selective default and restricted default on Friday, citing the country’s complex debt restructuring.

This week, Ukraine’s international creditors supported the country’s request for a two-year payment moratorium on around $20 billion in global bonds. According to Prime Minister Denys Shmyhal, the measure will save Ukraine almost $6 billion in payments.

S&P downgraded Ukraine’s foreign currency rating from “CC/C” to “SD/SD.”

S&P stated, “given the declared terms and conditions of the restructuring and by our criteria, we assess the transaction as distressed and equivalent to a default.”

Fitch downgraded the country’s long-term foreign currency rating from “C” to “RD” because it considers the deferral of debt payments to culminate in a distressed debt exchange.

The macroeconomic and fiscal pressures resulting from Russia’s invasion of Ukraine may impede the Ukrainian government’s capacity to service its local currency debt, according to S&P, which cut Ukraine’s local currency rating from “B-minus/B” to “CCC-plus/C.”

Damaged by Russia’s invasion, which began on February 24, Ukraine expects a 35-45% economic collapse in 2022 and a $5bn monthly fiscal deficit.