Standard & Poor's Ratings Services has lowered its long-term foreign currency sovereign credit rating on Ukraine to 'CC' from 'CCC-', the agency said in a press release.

At the same time, S&P affirmed the long-term local currency sovereign credit ratings at 'CCC+'.

It also affirmed the short-term foreign and local currency sovereign credit ratings at 'C' and the national scale rating at 'uaB+'.

The outlook is negative.

"The downgrade reflects our expectation that a default on foreign currency central government debt is a virtual certainty," S&P said.

S&P said that under its criteria, S&P would classify an exchange offer or similar restructuring of Ukraine’s foreign currency debt as tantamount to default.

"Once the distressed exchange offer has been confirmed, we would likely lower the foreign currency ratings on Ukraine to 'SD' and the affected issue rating(s) to 'D'," reads the report.

"The Ukraine ministry of finance’s debt operation is guided by the following objectives: (i) generate $15 billion in public-sector financing during the program period; (ii) bring the public and publicly guaranteed debt-to-GDP ratio under 71% of GDP by 2020; and (iii) keep the budget’s gross financing needs at an average of 10% of GDP (maximum of 12% of GDP annually) in 2019–2025," reads the report.

S&P said that there are no specific details on what the government will propose to investors in talks to seek $15.3 billion in savings.

"As such, the final outcome--in terms of a potential principal haircut, maturity extension, and coupon reduction for the 29 debt instruments under discussion--is highly uncertain," S&P said.

"The treatment of the eurobond owed to Russia (maturing in December 2015) is likely to complicate matters. The Ukrainian government insists it will be part of the talks, while the Russian government insists that the bond, although issued under international law, should be classified as "official" rather than "commercial" debt given the favorable interest rate and the fact that it was purchased by a government entity," S&P said.

"Indeed, if Ukraine has to pay the $3 billion in debt redemption this year, it will make it very difficult for Ukraine to find the $5 billion in expected debt relief in 2015 that underpins the IMF’s 2015 external financing assumptions," S&P said.

"If an exchange offer or restructuring takes place, once the exchange offer or restructuring is completed Ukraine would no longer be in default under our criteria. As such, the ‘SD’ rating would no longer be applicable, and we would at that point assess the post-restructuring creditworthiness of Ukraine," S&P said.