The Fitch ratings agency has declared Ukraine in partial default and downgraded the cash-strapped country after it failed to make payment on bonds it has been trying to renegotiate with creditors.
Fitch declared the partial default on $500 million in eurobond obligations on October 6 after Ukraine did not make payment following a grace period. It then downgraded the country's main credit rating to "restricted default."
Ukraine has been struggling with its debts since entering a deep economic recession after war broke out with pro-Russian insurgents in its eastern industrial heartland early last year.
Ukraine struck a deal in August to restructure much of its debt, but a small group of private lenders torpedoed the agreement, leading Kyiv to launch an exchange offer.
Fitch said the "distressed debt exchange" for $18 billion in eurobonds is designed to avoid default and will harm creditors.
Rival ratings agency Standard & Poor's similarly declared Ukraine in selective default last month, saying Kyiv's offer to creditors would include a 20 percent "haircut" in the money they are owed.
Fitch said it expects the debt exchange to be successful and it will upgrade Ukraine's credit rating shortly afterward.