S&P cuts Ukraine’s credit grade as default becomes ‘virtual certainty’
Ukraine had its credit grade cut by S&P Global Ratings after the war-ravaged nation asked foreign creditors for permission to delay payments on its external debt after Russia’s invasion.
The country was downgraded to CC from CCC+ on Friday by S&P, which kept a negative outlook given the high probability that officials move forward with plans to restructure its foreign debt. The rating could be cut again by S&P to selective default if the government in Kyiv gets bondholders to agree to a two-year payment freeze and changes to coupons on its so-called GDP warrants by the middle of next month.
“We believe it is virtually certain that the Ukrainian government will stop payments on at least some foreign debt as currently documented,” S&P said in a Friday statement.
Ukraine could also enter default if it fails to make foreign-currency debt payments within applicable grace periods — something S&P said is likely.
Ukraine filed its formal request to delay bond payments earlier in July, and the Finance Ministry said it “received explicit indications of support” for the plan from a select group of its biggest debt holders, including BlackRock Inc., Fidelity International, Amia Capital and Gemsstock Ltd. The Paris Club also supported a suspension of debt servicing.
Ukraine was downgraded by Fitch Ratings to C from CCC last week, with the company saying the government’s request constitutes a “default-like process.” Ukraine is rated Caa3 by Moody’s Investors Service.
While the government’s ability to meet hryvnia debt obligations is higher, indications that restructuring efforts will extend to the local debt could trigger a downgrade for the local-currency ratings, too, S&P said.“We consider Ukraine’s hryvnia-denominated government debt to be less vulnerable to nonpayment,” S&P said in the release.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Comments are closed.