Ukraine Already In Default, Fitch And S&P Declare

Global rating agencies S&P and Fitch on Friday, August 12, 2022, lowered Ukraine's foreign currency ratings to selective default and restricted default as they consider the country's debt restructuring as distressed, Reuters reported.

Photo Insert: Ukraine's local currency rating was lowered to "CCC-plus/C" from "B-minus/B."

Earlier this week, Ukraine's overseas creditors backed the country's request for a two-year freeze on payments on almost $20 billion in international bonds. The move will save Ukraine some $6 billion on payments according to Prime Minister Denys Shmyhal.

"Given the announced terms and conditions of the restructuring, and in line with our criteria, we view the transaction as distressed and tantamount to default," S&P said. Fitch cut the country's long-term foreign currency rating to "RD" from "C," as it deems the deferral of debt payments as a completion of a distressed debt exchange.

S&P also said the macroeconomic and fiscal stress stemming from Russia's invasion of Ukraine may weaken the Ukrainian government's ability to stay current on its local currency debt and lowered the Eastern European country's local currency rating to "CCC-plus/C" from "B-minus/B."

Battered by Russia's invasion, which started on Feb. 24, Ukraine faces a 35%-45% economic contraction in 2022 and a monthly fiscal shortfall of $5 billion.

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