S&P Global Ratings on Oct. 2 lowered El Salvador's long- and short-term foreign- and local-currency credit ratings to Selective Default, or SD, from CC and C, respectively.
The rating agency said the recently approved amendments to the terms of the country's Certificates for Pension Investments are "a distressed offer rather than purely opportunistic."
The changes include an extension of the CIPs' term to 30 years from 25 years, a grace period for capital payments and modified interest rates.
S&P said despite the distressed exchange on the CIP bonds triggering the selective default, El Salvador remains current in all other market bonds.
El Salvador's government expects the restructuring to become effective soon. S&P said it will review the country's general credit standing upon completion of the restructuring, adding that it will "most likely" raise the foreign- and local-currency long-term ratings.
Meanwhile, S&P affirmed the CCC issue credit rating on El Salvador's international bonds.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.