S&P downgrades Lviv

Standard & Poor's said it lowered its long-term issuer credit and Ukraine national scale ratings on the Ukrainian city of Lviv to SD (selective default) following the city's default on a small coupon payment.

The agency also said it lowered the senior unsecured debt ratings on the UAH 92 million bond tranche A due July 20, 2012 and tranche B due Dec. 19, 2012 to D. The city defaulted on the tranche A coupon. The agency then raised the issuer credit and national scale ratings to CCC+/uaBB and the bond ratings back to CCC+/uaBB because the necessary funds due were transferred.

The outlook is negative.

The ratings reflect the unsupportive and centralized nature of the Ukrainian system of interbudgetary relations, S&P said.

The central government effectively controls local and regional governments' budget execution, the agency said.

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