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Suriname downgraded to ‘RD’ from ‘C’ as interest payments missed: Fitch

ECONOMYNEXT – Fitch Ratings has donwgraded Suriname to ‘Restricted Default’ (RD) as the country missed interest payments on two international debt securities.

“This marks an event of default under Fitch’s criteria with respect to the sovereign’s IDR as well as the issue ratings of the affected securities (Global 2023 and 2026 notes),” Fitch said.

“The government of Suriname continues to negotiate with creditors for a comprehensive restructuring of its external bonds, which has been a protracted process.

“The national authorities are concurrently pursuing a funded IMF program, but did not reach an agreement in time to trigger an extension of the debt service payment date by one month, as set out in the second consent solicitation terms agreed in December 2020.”

“Should Suriname reach an agreement with noteholders resulting in a comprehensive bond restructuring that supports Suriname’s near-term payment capacity, this would constitute a “distressed debt exchange” (DDE) under Fitch’s Sovereign Rating Criteria, and would result in the upgrade of the sovereign’s ratings out of ‘RD’ to a level consistent with its credit fundamentals on a forward-looking basis.”

The full statement is reproduced below.

Fitch Downgrades Suriname’s Long-Term Foreign Currency IDR to ‘RD’

Thu 01 Apr, 2021 – 5:50 PM ET

Related Fitch Ratings Content:

Fitch Ratings – New York – 01 Apr 2021: Fitch Ratings has downgraded Suriname’s Long-Term Foreign Currency Issuer Default Rating (IDR) to ‘RD’ from ‘C’. Suriname’s Short-Term Foreign Currency IDR is affirmed at ‘C’.

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The two issue ratings on Suriname’s USD550 million notes due 2026 and USD125 million notes due 2023 on which the government has defaulted were downgraded to ‘D’ from ‘C’ and then withdrawn for the following reason: Bankruptcy of the rated entity, debt restructuring or issue/tranche default.

KEY RATING DRIVERS

The downgrade of Suriname’s IDR to ‘RD’ reflects the non-payment of USD49.8 million of rescheduled external debt service on Suriname’s 2023 and 2026 notes due March 31. This marks an event of default under Fitch’s criteria with respect to the sovereign’s IDR as well as the issue ratings of the affected securities (Global 2023 and 2026 notes).

Another USD25.4 million semi-annual interest payment is due April 26 on the Suriname 2026 notes. Altogether USD75.3 million total debt service is due on Suriname’s global bonds within the next 30 days.

The government of Suriname continues to negotiate with creditors for a comprehensive restructuring of its external bonds, which has been a protracted process. The national authorities are concurrently pursuing a funded IMF program, but did not reach an agreement in time to trigger an extension of the debt service payment date by one month, as set out in the second consent solicitation terms agreed in December 2020. In response to the government of Suriname’s consent solicitation issued March 17, the third since June 2020, noteholders highlighted concerns that have limited negotiation progress, and on March 31, the government of Suriname extended the consent solicitation response deadline to April 8.

As a consent solicitation would result in a further standstill of debt service amid the broader debt restructuring process rather than normalize payments to bondholders, Fitch expects the Long-Term Foreign Currency IDR to remain at ‘RD’ even if creditors agree to it. Should Suriname reach an agreement with noteholders resulting in a comprehensive bond restructuring that supports Suriname’s near-term payment capacity, this would constitute a “distressed debt exchange” (DDE) under Fitch’s Sovereign Rating Criteria, and would result in the upgrade of the sovereign’s ratings out of ‘RD’ to a level consistent with its credit fundamentals on a forward-looking basis.

ESG – Governance: Suriname has an ESG Relevance Score of ‘5’ for both Political Stability and Rights and 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 (WBGI) have in Fitch’s proprietary Sovereign Rating Model. Suriname has a medium WBGI ranking at the 43rd percentile, reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law but a high level of corruption.

ESG – Creditor Rights: Suriname has an ESG Relevance Score of ‘5’ for Creditor Rights as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight, as evident in Suriname’s protracted debt default and restructuring process during 2020-2021.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

–Completion of a commercial debt restructuring that Fitch judges to have normalized relations with the international financial community.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

–Due to the rating being in Restricted Default, negative actions are not applicable

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