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Fitch downgrades CAP - Says investors losing confidence in Jamaica
Published: Friday | November 27, 2009
Jamalco plant in Clarendon. - File
Fitch Ratings has down-graded state-owned Clarendon Alumina Production Limited (CAP), a day after it cut Jamaica's sovereign rating.
CAP's foreign and local currency rating was dropped to 'CCC' from 'B-', with a negative outlook.
The company's US$200-million bond due to mature in November 2021, was also downgraded from 'B/RR4' to 'CCC/RR4'.
The bonds are priced at 8.5 per cent.
Working against CAP is its 100 per cent ownership by Government, which three ratings agencies have placed on watch, in anticipation of a debt default.
CAP, a 24-year-old company, is the vehicle used by Jamaica to hold its now reduced 45 per cent holdings in the Jamalco Refinery, a business it owns in partnership with Alcoa, whose stake is now 55 per cent.
Jamaica became a minority partner back in 2007 under a deal in which
Alcoa pumped in new cash to upgrade the refinery to 1.4-million tonne capacity, getting in return an additional five per cent equity.
Jamaica on Tuesday hit a triple with Fitch's downgrade on the long-term foreign and local currency debt from 'B' to 'CCC', saying any attempt at debt restructuring would be read as a default.
Similar actions have been taken by ]Standard & Poor's and Moody's.
"Limited policy options to meet the fiscal challenges raise the possibility of some form of debt restructuring," said Fitch analyst Shelly Shetty in a statement from the rating agency.
The rating agency says it expects the fiscal deficit to round out the year at 9.0 per cent.
It compared its new forecast to Jamaica's original 5.5 per cent estimate, though Finance Minister Audley Shaw already put a new target of 8.7 per cent on the table at the close of September when the revised budget was presented to lawmakers for passage.
The Fitch downgrade comes two days after Prime Minister Bruce Golding, speaking at his party's annual conference in Kingston, pitched part of his message to overseas creditors, saying Jamaica was not about to default on its debt - suggesting that Jamaica's word is no longer seen as its 'bond'.
Golding also said Sunday that when debt servicing charges and wages are paid, central government is left with only $70 billion - around 12 per cent of the total budget - to run the country.
Jamaica, as such, needs to strike a deal with the International Monetary Fund (IMF) that would loosen up lending from multilaterals.
Question: If we are already suffering from Babylon pricing in a penalty due to possible restructuring/default of Jamaica's debt ....why not restructure or reschedule the damn debt in cooperation with our new IMF masters?
Forget about trying to "maintain our proud record" of debt payments. Pride cometh before a fall...or in this case before more misery and failure.
Take the hit now and try to get the debt situation more under control so we can breathe..... debt restructuring is not the end of the world.
Many companies and countries restructure...Dubai is the latest to propose a moratorium on debt payments.
This idea about economic growth enabling Jamaica to manage its debt payments is a cruel mirage.... that will not occur anytime soon.
Time to bite that debt bullet.
Published: Friday | November 27, 2009
Jamalco plant in Clarendon. - File
Fitch Ratings has down-graded state-owned Clarendon Alumina Production Limited (CAP), a day after it cut Jamaica's sovereign rating.
CAP's foreign and local currency rating was dropped to 'CCC' from 'B-', with a negative outlook.
The company's US$200-million bond due to mature in November 2021, was also downgraded from 'B/RR4' to 'CCC/RR4'.
The bonds are priced at 8.5 per cent.
Working against CAP is its 100 per cent ownership by Government, which three ratings agencies have placed on watch, in anticipation of a debt default.
CAP, a 24-year-old company, is the vehicle used by Jamaica to hold its now reduced 45 per cent holdings in the Jamalco Refinery, a business it owns in partnership with Alcoa, whose stake is now 55 per cent.
Jamaica became a minority partner back in 2007 under a deal in which
Alcoa pumped in new cash to upgrade the refinery to 1.4-million tonne capacity, getting in return an additional five per cent equity.
Jamaica on Tuesday hit a triple with Fitch's downgrade on the long-term foreign and local currency debt from 'B' to 'CCC', saying any attempt at debt restructuring would be read as a default.
Similar actions have been taken by ]Standard & Poor's and Moody's.
"Limited policy options to meet the fiscal challenges raise the possibility of some form of debt restructuring," said Fitch analyst Shelly Shetty in a statement from the rating agency.
The rating agency says it expects the fiscal deficit to round out the year at 9.0 per cent.
It compared its new forecast to Jamaica's original 5.5 per cent estimate, though Finance Minister Audley Shaw already put a new target of 8.7 per cent on the table at the close of September when the revised budget was presented to lawmakers for passage.
The Fitch downgrade comes two days after Prime Minister Bruce Golding, speaking at his party's annual conference in Kingston, pitched part of his message to overseas creditors, saying Jamaica was not about to default on its debt - suggesting that Jamaica's word is no longer seen as its 'bond'.
Golding also said Sunday that when debt servicing charges and wages are paid, central government is left with only $70 billion - around 12 per cent of the total budget - to run the country.
Jamaica, as such, needs to strike a deal with the International Monetary Fund (IMF) that would loosen up lending from multilaterals.
Question: If we are already suffering from Babylon pricing in a penalty due to possible restructuring/default of Jamaica's debt ....why not restructure or reschedule the damn debt in cooperation with our new IMF masters?
Forget about trying to "maintain our proud record" of debt payments. Pride cometh before a fall...or in this case before more misery and failure.
Take the hit now and try to get the debt situation more under control so we can breathe..... debt restructuring is not the end of the world.
Many companies and countries restructure...Dubai is the latest to propose a moratorium on debt payments.
This idea about economic growth enabling Jamaica to manage its debt payments is a cruel mirage.... that will not occur anytime soon.
Time to bite that debt bullet.
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