Ukraine Rating Downgraded by S&P on Debt Restructuring Plan
- S&P cuts nation’s score to CCC from CCC+ with negative outlook
- Ukraine has about $23 billion in global bonds, data show
Ukraine’s credit score was cut by S&P Global Ratings after the government unveiled a plan to restructure its external debt before mid-2024.
The war-torn nation was lowered to CCC from CCC+ on Thursday, with a negative outlook. The ratings firm cited plans for an upcoming debt restructuring as part of Ukraine’s recent arrangement with the International Monetary Fund for a $15.6 billion bailout.
“We therefore consider it likely that Ukraine will enter a distressed exchange on its external commercial obligations without an unforeseen positive development,” S&P analysts led by Karen Vartapetov wrote in a statement. “The parameters and timing of the restructuring have yet to be decided and are contingent on the IMF’s assessment of public debt sustainability, which is expected to be updated in early 2024.”
The IMF’s executive board last week signed off on four-year loan to Ukraine, marking the final approval for the institution’s first-ever loan to a nation at war.
As part of the efforts to secure the deal, Ukraine got a group of its official creditors to extend a debt repayment standstill until 2027. The government also said in a statement that it would seek a debt treatment to help restore debt sustainability, preserve liquidity and reduce its financing gap during the IMF program.
A so-called treatment can include debt restructuring or rescheduling, among other possible steps. Ukrainian authorities have also said they expect to begin early next year discussions with bondholders, which are different creditors than the sovereign lenders, and aim complete those talks as soon as mid-year.
All together, it’s an effort to address the nation’s troubled financial position as Russia’s war continues. Ukraine has about $23 billion outstanding in international bonds, according to data compiled by Bloomberg. Last year, the nation’s dollar bonds were the worst performers in the world, handing investors losses of 77%, according to data compiled from a Bloomberg index.
The S&P downgrade puts it on par with Ethiopia. In February, Moody’s Investors Service cut Ukraine’s credit rating to the second-lowest score of Ca, on par with Argentina, citing “long-lasting challenges” to its economy and public finances from the war with Russia.
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