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Tue Feb 12, 2013 5:53pm EST
NEW YORK, Feb 12 (Reuters) - Rating agencies Fitch andStandard & Poor's on Tuesday cut Jamaica's ratings due to a debtexchange program by the island nation that S&P said it viewed asa default. "Jamaica has announced a domestic debt exchange program thatofficially launches today," S&P said in a statement. "Based onour criteria, we consider this exchange a default." S&P cut Jamaica's rating to SD, or selective default. Fitchcut the country to C. "In Fitch's opinion, the exchange, if completed, wouldconstitute a 'distressed debt exchange' (DDE) in line with itscriteria, as the operation adversely impacts the originalcontractual terms of domestic bondholders," the agency said in astatement. The cut to both foreign and local currency ratings indicates"that default on both types of debt instruments is highly likelyin the near term," Fitch added. Once the exchange is complete, Fitch said, the ratings willbe lowered to RD, or restricted default. Jamaica will be lifted out of default after Fitch determinesthe exchange was successful, usually measured by a minimumparticipation rate of 90 percent, the agency said. S&P said it lowered its ratings on the bonds included in theproposed domestic debt exchange to D while lowering the ratingson government securities not included in the debt exchange toCCC. Jamaica has been in talks with the International MonetaryFund to discuss a new lending agreement that it hopes willsteady the economy of the debt-ridden Caribbean nation. On Monday, according to Thomson Reuters IFR, Jamaican PrimeMinister Portia Simpson Miller announced plans to reduce thecountry's debt as a pre-condition for implementation of a newIMF loan program. The debt exchange offer seeks to exchange Jamaica'sdomestically issued debt. "It includes foreign currency-denominated debt that wasissued locally, which carries foreign currency ratings, which iswhy we have lowered the foreign currency credit rating to 'SD.'This transaction excludes debt owed to nonresidents," S&P said. A sustained improvement in the government's debt profilewill take many years because of structural economic weaknesses,S&P said, even though short-term liquidity strains could ease asa result of the exchange. "We expect to assign a new sovereign credit rating in the'CCC' category to the new bonds upon the completion of the debtexchange and the issuance of the new bonds, which is scheduledfor later this month," said S&P sovereign analyst JoydeepMukherji. S&P estimates Jamaica's general government debt burden toremain high at above 115 percent of gross domestic product in2013. Net international reserves of $1 billion at the end ofJanuary, a drop of nearly 50 percent from the beginning of 2012,plus low prospects for economic growth will constrain the newrating, S&P said. Moody's Investors Service rates the country B3 with a stableoutlook.
NEW YORK, Feb 12 (Reuters) - Rating agencies Fitch andStandard & Poor's on Tuesday cut Jamaica's ratings due to a debtexchange program by the island nation that S&P said it viewed asa default. "Jamaica has announced a domestic debt exchange program thatofficially launches today," S&P said in a statement. "Based onour criteria, we consider this exchange a default." S&P cut Jamaica's rating to SD, or selective default. Fitchcut the country to C. "In Fitch's opinion, the exchange, if completed, wouldconstitute a 'distressed debt exchange' (DDE) in line with itscriteria, as the operation adversely impacts the originalcontractual terms of domestic bondholders," the agency said in astatement. The cut to both foreign and local currency ratings indicates"that default on both types of debt instruments is highly likelyin the near term," Fitch added. Once the exchange is complete, Fitch said, the ratings willbe lowered to RD, or restricted default. Jamaica will be lifted out of default after Fitch determinesthe exchange was successful, usually measured by a minimumparticipation rate of 90 percent, the agency said. S&P said it lowered its ratings on the bonds included in theproposed domestic debt exchange to D while lowering the ratingson government securities not included in the debt exchange toCCC. Jamaica has been in talks with the International MonetaryFund to discuss a new lending agreement that it hopes willsteady the economy of the debt-ridden Caribbean nation. On Monday, according to Thomson Reuters IFR, Jamaican PrimeMinister Portia Simpson Miller announced plans to reduce thecountry's debt as a pre-condition for implementation of a newIMF loan program. The debt exchange offer seeks to exchange Jamaica'sdomestically issued debt. "It includes foreign currency-denominated debt that wasissued locally, which carries foreign currency ratings, which iswhy we have lowered the foreign currency credit rating to 'SD.'This transaction excludes debt owed to nonresidents," S&P said. A sustained improvement in the government's debt profilewill take many years because of structural economic weaknesses,S&P said, even though short-term liquidity strains could ease asa result of the exchange. "We expect to assign a new sovereign credit rating in the'CCC' category to the new bonds upon the completion of the debtexchange and the issuance of the new bonds, which is scheduledfor later this month," said S&P sovereign analyst JoydeepMukherji. S&P estimates Jamaica's general government debt burden toremain high at above 115 percent of gross domestic product in2013. Net international reserves of $1 billion at the end ofJanuary, a drop of nearly 50 percent from the beginning of 2012,plus low prospects for economic growth will constrain the newrating, S&P said. Moody's Investors Service rates the country B3 with a stableoutlook.
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