S&P downgrades Ukraine’s GDP-linked bonds to default after failing to make a $665M payment.

The international rating agency S&P Global announced Ukraine’s default on its GDP-linked bonds. On June 2, the Ukrainian government failed to make the required payment of $665M, which led to the bonds’ downgrade from CC to D.

“We do not expect payment during the grace period for the securities stipulated in the agreement, which is 10 business days, given the government’s moratorium on payments on these bonds unless they are restructured,” the agency explained.

However, the agency maintained Ukraine’s SD/SD (selective default) foreign currency ratings, and the sovereign hryvnia rating was kept at CCC+/C. The forecast for hryvnia debt is stable, reflecting the government’s interest in servicing domestic debt to avoid pressure on the banking system, which is the main holder of these bonds.

The Ukrainian government suspended payments on commercial obligations that were not restructured in September of last year. These obligations account for approximately 6% of total commercial debt and less than 3% of total public debt.