S&P Global Ratings lowered its long-term foreign- and local-currency sovereign credit ratings on Belize to CC from CCC and placed the ratings on CreditWatch with negative implications, citing elevated risks of the country entering into a distressed debt exchange.
The ratings action came after the government announced its intention to discuss with the holders of its 2034 U.S. dollar bonds the possibility of deferring and capitalizing quarterly interest payments due from August 20, 2020, through February 2021. A formal consent solicitation is expected in early July, S&P Global Ratings said.
"In our view, the government's announcement is tantamount to an intention to undertake an exchange offer or similar restructuring that we would classify as distressed, even though it has not yet completed the transaction," the rating agency said.
Given heightened liquidity pressure due to the impact of the COVID-19 pandemic, a distressed debt exchange or unilateral default on the country's bond payments is "virtually certain at this point," the agency added.
S&P Global Ratings said it would lower the ratings to selective default if the government takes up a distressed exchange offer or is unable to pay the interest payment due in August before the 30-day grace period lapses.
It could remove the ratings from CreditWatch if the likelihood of a distressed exchange over the next three months decreases, among other factors.
The rating agency maintained Belize's short-term ratings at C.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.