S&P declares default on Ukraine’s GDP-linked securities
Photo: EPA

On June 3, S&P Global Ratings downgraded Ukraine’s troubled 2015 government-issued GDP-linked securities (commonly known as GDP warrants) from 'CC' to a default rating of 'D', according to the agency’s official website.

The downgrade followed Ukraine’s failure to make a scheduled payment of over $665 million on June 2. This payment was tied to the country’s 2023 economic growth performance. Finance Minister Serhiy Marchenko previously noted that "GDP warrants were created for an economic reality that no longer exists," and confirmed that Ukraine would not service these instruments until a restructuring is in place.

GDP warrants are government-issued securities that were introduced in 2015 as part of Ukraine’s previous sovereign debt restructuring. Their value depends on the country's economic performance: if Ukraine’s GDP growth exceeds a predetermined threshold, additional payments are triggered to investors.

In August 2024, the government introduced a moratorium on payments under the GDP warrants as part of a broader debt restructuring effort aimed at restoring debt sustainability under the IMF-supported program. Importantly, the securities were modified to eliminate cross-default provisions, meaning that a missed payment on these instruments does not constitute a broader default or risk the country’s financial stability.

Despite a standard 10-day grace period, the rating agency immediately declared a default on these instruments.

Ukraine’s other sovereign credit ratings remained unchanged: the foreign currency rating was affirmed at 'SD' (selective default), while the local currency rating was maintained at 'CCC'.

The relatively higher rating for hryvnia-denominated debt reflects the agency’s expectation that Ukraine will continue servicing its domestic obligations, as a default on local debt could seriously destabilize the national banking sector.

  • In August 2024, the Ministry of Finance reached an agreement with holders of Ukraine’s sovereign Eurobonds to write off 37% of the outstanding debt across 13 bond series. The repayment schedule was also extended—from 2024–2035 to 2029–2036. Following the agreement and resolution of procedural matters, Ukraine issued new bonds reflecting the reduced principal—$8.7 billion lower than the original amount.
  • On August 2, 2024, S&P Global Ratings formally assigned Ukraine a selective default ('SD') rating.