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Fitch downgrades Republic of Congo over frozen bond payment

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Fitch downgrades Republic of Congo over frozen bond payment

Fitch Ratings on Aug. 2 downgraded the Republic of the Congo's long-term foreign-currency issuer default rating to RD, or restricted default, from C and the issue ratings on senior unsecured foreign-currency bonds to D, or default, from C.

This follows nonpayment of principal and interest on the Congo's U.S. dollar notes, initially due June 30. A 30-day grace period to make the payment ended July 30.

The republic transferred the funds to the trustee but they were frozen under two restraining notices issued on behalf of Commissions Import Export SA. The trustee challenged the notices in U.S. courts, with a court hearing scheduled for Aug. 2.

The rating agency, however, flagged "considerable uncertainty about the time frame and outcome of any decision on these challenges." Fitch previously downgraded the Congo's long-term foreign-currency issuer default rating to C on July 17.

As part of its latest action on the Congo, Fitch affirmed the country ceiling at B+, as the nature of the default does not currently affect the ability of the private sector to make foreign-currency payments. Fitch also affirmed the Congo's long-term local-currency issuer default rating at CCC and its short-term foreign- and local-currency issuer default ratings at C.

S&P Global Ratings on Aug. 1 downgraded the country's long- and short-term foreign-currency sovereign credit ratings to SD, or selective default, and D, from CCC and C respectively, citing the frozen bond payment.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.