Standard & Poor’s has downgraded Ukraine’s credit rating from ‘CC’ to selective default ‘SD’ level, according to the agency’s website. The cut in its credit rating comes after Ukraine started restructuring debts and suspended payments on a number of liabilities that will be restructured.

A ‘selective default’ occurs when a borrower fails to pay one or more of its payment obligations, but continues to meet others.

S&P: Ukraine Foreign Currency Ratings Lowered To 'SD' (Selective Default) On Distressed Debt Restructuring — Jamie McGeever (@ReutersJamie) September 25, 2015

The main reason for the downgrade was that on September 23, the country failed to make a $500 million repayment, according to S&P.

Ukraine’s government then suspended all the payments on its external debt, following the restructure agreement with creditors. Kiev is exchanging its old bonds for new ones, to be completed by December 1. The new bonds include a 20 percent debt write-off and extended maturity through till 2019.

"Ukraine's invitation constitutes the launch of what we consider to be a distressed debt restructuring. We view an exchange offer as tantamount to default," as the offer implies that "the investor will receive less value than the promise of the original securities," the agency’s report said. The offer is distressed, rather than purely opportunistic, it added.

READ MORE: Kiev should ‘walk away’ from $3bn debt to Moscow – US senator

The list of non-payments doesn’t include the $3 billion owed to Russia. The debt to Moscow is due to be repaid in December. Russia insists it wants to receive the full amount.

According to the Ukrainian government website the restructuring applies to the $3 billion Eurobonds purchased by Russia.

READ MORE: Moody’s downgrades Ukraine heralding imminent default

In March, the Moody’s rating agency downgraded the long-term issuer rating of Ukraine to the second lowest grade, leaving the outlook negative with a high possibility of imminent default.

The agency then said one of the reasons for downgrading Ukraine’s rating was that foreign private lenders were expected to incur substantial losses due to the government's plan for restructuring the bonds it had issued or guaranteed.

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