Fitch Downgrades Sri Lanka to 'RD'.
ENPNewswire-May 20, 2022--Fitch Downgrades Sri Lanka to 'RD'
(C)2022 ENPublishing - http://www.enpublishing.co.uk
Release date- 19052022 - Fitch Ratings has downgraded Sri Lanka's Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to 'RD' (restricted default) from 'C'.
Fitch typically does not assign modifiers for sovereigns with a rating of 'CCC', or below.
A full list of rating actions is at the end of this rating action commentary.
Key Rating Drivers
Grace Period Ends: The downgrade of Sri Lanka's LTFC IDR to 'RD' follows expiry of the 30-day grace period on coupon payments that were due on 18 April 18 2022 on two international sovereign bonds.
On 12 April 2022 the Ministry of Finance made a statement that it had suspended normal debt servicing of several categories of its external debts, including bonds issued in the international capital markets and foreign currency-denominated loan agreements or credit facilities with commercial banks or institutional lenders. Following this announcement, we downgraded the LTFC IDR to 'C' on 13 April 2022.
We have downgraded Sri Lanka's foreign-currency issue ratings to 'D' from 'C', given the default on the senior unsecured foreign-currency bonds and the cross-default clauses triggered in the other rated international foreign-currency sovereign bonds.
Local Currency Debt Not Affected: The rating action applies only to the government's long-term external debt obligations. We have affirmed Sri Lanka's Long-Term Local-Currency IDR at 'CCC', as the government has continued to service local-currency debt and we assume this will continue. We have also affirmed Sri Lanka's Short-Term IDRs at 'C' and the Country Ceiling at 'B-'.
ESG - Governance: Sri Lanka has an ESG Relevance Score of '5' for Political Stability and Rights as well as for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the World Bank Governance Indicators have in our proprietary Sovereign Rating Model. Sri Lanka has a medium World Bank Governance Indicator ranking in the 46th percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.
ESG - Creditor Rights: Sri Lanka has an ESG Relevance Score of '5' for Creditor Rights as willingness to service...
To continue reading
Request your trial