Suriname sovereign credit rating downgraded by Moody's to Caa3 from B3

Suriname sovereign credit rating downgraded by Moody's to Caa3 from B3

Corporate & Sovereign Strategy Economy & Policy Latin America Suriname

Ratings agency Moody's Investors Service on Tuesday lowered the Government of Suriname's sovereign foreign currency credit rating to Caa3 from B3 due to the higher probability of a distressed exchange or default on its market debt since the last downgrade in April.

Moody's said it reduced the rating due to increasing spending pressures related to the coronavirus that has raised financing needs and led to a severe tightening of financial conditions. The rating remains on a negative outlook, the firm said in a statement.

"Given the rise in the debt burden and limited financing options, Moody's anticipates the government could impose heavier losses on bondholders through a more extensive restructuring of outstanding government debt that goes beyond the recent consent solicitation to defer payments, as part of a broader economic reform program," the statement said.

Suriname reached an agreement with holders of roughly 83% of Suriname's 9.875% 2023 bonds to defer payments after the sovereign  missed making one on June 30.

"The government has already issued a consent solicitation to defer payment of principal that was due on June 30, which Moody's expects will be granted," the report stated.

Moody's predicts Suriname's real GDP will contract by 4% and its fiscal deficit will reach 10% of GDP in 2020.