S&P: Rating actions reflect missed USD 0.67 bln payment on Ukraine's 2041 GDP-linked securities

S&P: Rating actions reflect missed USD 0.67 bln payment on Ukraine's 2041 GDP-linked securities

Ukraine's recent decision to skip a scheduled payment of $665 million on its 2041 GDP-linked securities has resulted in a rating action by S&P Global Ratings. The missed payment, part of a broader moratorium imposed by the Ukrainian government, has led to a downgrade of the country's credit rating.

According to a press release from Ukraine's Ministry of Finance, the moratorium on payments for these securities, known as GDP warrants, was put in place in August 2024. This move was taken to facilitate negotiations with creditors over new terms for the $3.3 billion of debt linked to the country's economic growth. The moratorium remains in effect until the restructuring process is completed [1].

The first round of talks with creditors about the GDP warrants was unsuccessful, with Ukraine offering two options, including a full exchange for sovereign bonds. However, creditors were only willing to restructure the May payment, demanding more than $400 million in cash and the conversion of more than $200 million into new bonds [1].

In response to this development, S&P Global Ratings downgraded Ukraine's credit rating. The downgrade reflects the missed payment and the uncertainty surrounding the restructuring of the GDP-linked debt. The rating action underscores the financial risks associated with Ukraine's debt management and the potential impact on the country's economic stability.

Ukraine's chief debt negotiator, Yuriy Butsa, has stated that the country is not in a hurry to restructure its GDP-linked debt and is seeking a "right deal" rather than rushing to meet a deadline [1]. This approach, while cautious, may prolong the negotiations and further impact Ukraine's financial standing.

The missed payment and the ongoing negotiations have significant implications for Ukraine's financial stability and its ability to attract foreign investment. As the negotiations continue, investors will closely monitor the situation to assess the potential impact on Ukraine's creditworthiness and economic prospects.

References:
[1] https://www.kyivpost.com/post/53723