S&P Global Ratings on Friday cut Ukraine’s long-term debt grade by three notches, saying the recently announced plan to defer payments means a default is “a virtual certainty.”
The agency lowered the rating to “CC” from “CCC+” after the government proposed deferring payments on all external debt obligations by 24 months.
The ratings outlook remains negative which “reflects our view that Ukraine is likely to implement its debt restructuring plans, which we consider tantamount to a default,” the statement said.
A group of Western countries last week gave their green light to Kyiv’s request to postpone interest payments on its debt and called on other creditors to do so as well.
The governments said the postponement of the debt service would allow it to prioritize funding for the war effort. The group, which includes Britain, France, Germany, Japan and the United States, called on other countries which have lent money to Ukraine to join in the effort, as well as bondholders.
S&P said private bondholders have been asked to vote on the proposal by August 9.
The ratings agency noted that the plan “does not include any debt haircuts and offers some compensation to bondholders” but still would consider the country in default.
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