Standard & Poor's cut the sovereign long-term foreign currency credit rating on Cyprus deeper into junk status on Thursday, lowering the rating to CCC from CCC-plus as the country struggles with a banking crisis.
The European Union gave Cyprus until Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency bloc.
A bailout deal brokered between Cypriot President Nicos Anastasiades and the EU last weekend in Brussels was unanimously rejected by the Mediterranean island nation's parliament. The deal would have imposed a tax on Cypriot deposit accounts to raise 5.8 billion euros ($7.5 billion) that the EU required in return for a 10 billion euro ($13 billion) bailout.
(Read More: Scenes From the Cyprus Crisis)
"We believe that in the absence of a credible alternative source of capital and fiscal financing, the risk of a disorderly credit event is rising," S&P said in its statement.
Jeroen Dijsselblem, the head of the Eurogroup, which comprises the finance ministers of countries whose currency is the euro, on Thursday urged Cyprus to present a new proposal on the bailout.