S&P Downgrades Ukraine's Long-Term Foreign Currency Ratings

The ratings agency views default on Ukraine's foreign currency debt as "virtually inevitable".

MOSCOW (Sputnik) — Standard & Poor's Ratings Services said Friday it has lowered its long-term foreign currency sovereign credit rating on Ukraine to 'CC' from 'CCC-' with the negative outlook.

"The Ukrainian government has announced its intention to restructure its foreign currency commercial debt. Under our criteria, we expect we would classify an exchange offer or similar restructuring of Ukraine’s foreign currency debt as tantamount to default," the ratings agency said in a statement.

"The negative outlook reflects the deteriorating macroeconomic environment and growing pressure on the financial sector, as well as our view that default on Ukraine’s foreign currency debt is virtually inevitable."

The rating agency stressed that if Ukraine has to pay $3 billion in debt redemption in 2015, it will be difficult for Kiev to find the $5 billion in expected debt relief this year as required by the IMF as a condition for handing out more money to Kiev.

In December 2013, Russia made a decision to issue Ukraine a loan of $15 billion and bought Ukraine’s first Eurobonds to the amount of $3 billion, which are due to mature at the end of this year.

The situation threatens a four-year $17.5 billion financial assistance package for Ukraine, endorsed by the IMF as part of a larger international $40 billion package.

The package is aimed at supporting Ukrainian economic reforms, stabilizing the country’s finances and reversing a pattern of economic stagnation, according to the IMF.