The cut is the latest blow to Egypt's economy, which has been badly battered over the last year by frequent strikes and protests since the ouster of President Hosni Mubarak on Feb. 11, 2011.
S&P said in a statement Friday it cut Egypt's long-term foreign and local currency sovereign ratings to B from B+, with a negative outlook.
It said the country's transition to democracy could falter, "leading to weaker political institutions and rising domestic conflict."
Egypt's ruling army generals say they'll give up power before the end of June. Protesters want them to transfer power to civilians immediately.
