S&P downgrades SL bonds to ‘D’ after missed payments

Rating agency S&P yesterday downgraded several Sri Lankan bonds from “D” to “CC” after missed payments, while confirming its long-term “SD” and short-term “SD” sovereign currency ratings.

“At the same time, we confirmed our long-term “CCC-” and short-term “C” sovereign ratings in local currency. The outlook on the local currency’s long-term rating remains negative,” S&P said.

“In addition, we downgraded to “D” from “CC” the issue ratings of the following bonds with missed coupon or principal payments: $1.0 billion, 6.85% bonds due March 14 2024; $1.4 billion 7.85% bonds due March 14, 2029 and $1.5 billion 7.55% bonds due March 28, 2030.

S&P said its assessment of the transfer and convertibility at “CC” is unchanged.

The government remains in default on certain foreign currency obligations, including international sovereign bonds (ISBs).

“We do not expect the government to make payments on ISBs within 30 calendar days of their due dates. We have downgraded the ratings of the affected bonds to ‘D’ from ‘CC’, following missed interest payments due on September 14 and September 28, 2022,” S&P said.

It also confirmed its foreign currency “SD/SD” and local currency “CCC-/C” ratings on Sri Lanka. The outlook on the long-term rating in local currency is negative.

S&P…

“Our FX rating on Sri Lanka is ‘SD’ (Selective Default). We do not assign an outlook to ‘SD’ ratings as they express a condition and not a forward-looking view on the likelihood of default,” S&P added. .

The negative outlook on the local currency rating reflects high risk for commercial debt repayments over the next 12 months amid Sri Lanka’s economic, external and fiscal pressures.

“We may downgrade local currency ratings if there are indications of nonpayment or restructuring of rupee-denominated bonds,” S&P said.

“We could revise the outlook to stabilize it or raise the local currency ratings if we perceive that the likelihood that the government’s local currency debt will be excluded from any debt restructuring has increased. This could be the case if, for example, the government receives significant donor funding, giving it time to implement immediate and transformative reforms,” he added.

S&P also said it would raise its long-term foreign currency sovereign credit rating once the government bond restructuring is complete. The rating would reflect Sri Lanka’s creditworthiness after the restructuring. Our post-restructuring ratings tend to be in the “CCC” or “B” low categories, depending on the new sovereign debt structure and its ability to sustain that debt.

Sri Lanka’s external public debt moratorium prevents the payment of interest and principal obligations due on the government’s ISBs. This would have affected interest payments due on September 14 and September 28, on its ISBs maturing in 2024, 2029 and 2030.

“As a result of the missed payments, and given our belief that payments have not been made within 30 calendar days of the due dates, we have lowered the issue ratings of these bonds to ‘D’ (default ),” S&P said. Rating agency S&P yesterday downgraded several Sri Lankan bonds from ‘D’ to ‘CC’ after missed payments while confirming its long-term ‘SD’ and short-term ‘SD’ sovereign foreign currency ratings .

“At the same time, we confirmed our long-term “CCC-” and short-term “C” sovereign ratings in local currency. The outlook on the local currency’s long-term rating remains negative,” S&P said.

“In addition, we downgraded to “D” from “CC” the issue ratings of the following bonds with missed coupon or principal payments: $1.0 billion, 6.85% bonds due March 14 2024; $1.4 billion 7.85% bonds due March 14, 2029 and $1.5 billion 7.55% bonds due March 28, 2030.

S&P said its assessment of the transfer and convertibility at “CC” is unchanged.

The government remains in default on certain foreign currency obligations, including international sovereign bonds (ISBs).

“We do not expect the government to make payments on ISBs within 30 calendar days of their due dates. We have downgraded the ratings of the affected bonds to ‘D’ from ‘CC’, following missed interest payments due on September 14 and September 28, 2022,” S&P said.

It also confirmed its foreign currency “SD/SD” and local currency “CCC-/C” ratings on Sri Lanka. The outlook on the long-term rating in local currency is negative.

“Our FX rating on Sri Lanka is ‘SD’ (Selective Default). We do not assign an outlook to ‘SD’ ratings as they express a condition and not a forward-looking view on the likelihood of default,” S&P added. .

The negative outlook on the local currency rating reflects high risk for commercial debt repayments over the next 12 months amid Sri Lanka’s economic, external and fiscal pressures.

“We may downgrade local currency ratings if there are indications of nonpayment or restructuring of rupee-denominated bonds,” S&P said.

“We could revise the outlook to stabilize it or upgrade the local currency ratings if we perceive that the likelihood of government local currency debt being excluded from any debt restructuring has increased. This could be the case if, for example, the government receives significant donor funding, giving it time to implement immediate and transformative reforms,” he added.

S&P also said it would raise its long-term foreign currency sovereign credit rating once the government bond restructuring is complete. The rating would reflect Sri Lanka’s creditworthiness after the restructuring. Our post-restructuring ratings tend to be in the “CCC” or “B” low categories, depending on the new sovereign debt structure and its ability to sustain that debt.

Sri Lanka’s external public debt moratorium prevents the payment of interest and principal obligations due on the government’s ISBs. This would have affected interest payments due on September 14 and September 28, on its ISBs maturing in 2024, 2029 and 2030.

“As a result of the missed payments, and given our belief that payments have not been made within 30 calendar days of the due dates, we have lowered the issue ratings of these bonds to ‘D’ (default ),” S&P said.


Comments are closed.