Ratings agencies S&P and Fitch downgraded Ukraine’s sovereign debt rating by just one notch to default after announcing the suspension of external debt to international creditors on Wednesday.
Standard & Poor’s (S&P – S&P) on Friday downgraded its long-term and short-term foreign currency debt rating from “CC/C” to “SD” (selective default).
“Given the announced terms of the restructuring and by our standards, we consider this transaction … equivalent to a default,” the agency said in a statement.
Ukraine has received approval from its international creditors to freeze the repayment of its $20 billion external debt for two years.
For its part, Fitch has downgraded Ukraine’s long-term debt rating from ‘C’ to ‘RD’ (limited default).
Neither agency has attached its memorandum to the outlook, indicating a decision to raise or lower the level of sovereign debt or leave it unchanged in the future.
A country is considered insolvent when it cannot meet its financial obligations to its country creditors or financial institutions (International Monetary Fund and World Bank) or investors in the financial markets.
Partial default is when the state does not fulfill part of its obligations.
A group of Western creditors including France, the US, Germany, Japan and the UK agreed on July 20 to defer interest payments on Ukraine’s debt following a request from Kyiv and urged other bondholders to follow suit.
The Ukrainian economy has collapsed since the conflict with Russia began in February, and according to the latest estimates released by the World Bank in June, gross domestic product could fall by 45 percent this year.
The financial news agency Bloomberg has calculated that delaying the repayment of Ukraine’s bonds could save $3 billion over two years.
Source: AFP.