S&P Global Ratings downgraded its sovereign credit ratings on Ecuador to selective default from CCC-/C, saying it expects the country to miss upcoming interest payments on some global bonds.

Ecuador's government launched two solicitations of consent with bondholders April 8, requesting a deferral of interest payments worth more than $800 million on about 10 global bonds until mid-August, while the country engages with investors to re-profile its debt and negotiate a new agreement with the International Monetary Fund.

S&P Global Ratings said it would consider the consent solicitation as a distressed exchange if majority of the creditors agree to the government's request. If bondholders disagree with the proposal, Ecuador would likely fail to make a payment on three bonds within a 30-day grace period, after already missing interest payments due March 27.

"Ecuador's rating trajectory depends on its access to official and external commercial financing to cover the government's financing needs and support foreign exchange reserves," said S&P Global Ratings, which noted that Ecuador's already elevated budgetary financing needs have been aggravated by the coronavirus pandemic and oil price shock.

The rating agency did not assign an outlook on the country.

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