"Venezuela failed to make $45 million in coupon payments for its global bonds due 2020 within the 30-calendar-day grace period," reports global ratings agency S&P. "In line with our criteria for timeliness of payments, we are lowering the issue rating on this bond to 'D' from 'CC'. We are affirming the long-term foreign currency sovereign credit rating on Venezuela at 'SD'."
By Manuel Orozco
& Lisa M Schineller, PhD
Standard and Poor's
MEXICO CITY -- On Jan. 9, 2018, S&P Global Ratings lowered its issue rating on the Bolivarian Republic of Venezuela's global bond due 2020 to 'D' from 'CC'. At the same time, we affirmed our long- and short-term foreign currency sovereign issuer credit ratings at 'SD/D'. The long- and short-term local currency sovereign credit ratings remain at 'CCC-/C' and are still on CreditWatch with negative implications, where we placed them on Nov. 3, 2017. Other foreign currency senior unsecured debt issues not currently rated 'D' are rated 'CC'. CREDITWATCH
Our CreditWatch negative listing reflects our opinion that there is a one-in-two chance that Venezuela could default again within the next three months. We could lower specific issue ratings to default ('D') if Venezuela doesn't make its overdue coupon payments before the stated grace period expires, or upon the execution of the announced debt restructuring.
If the sovereign cures its default on the overdue coupon payments and remains timely on other coupon payments before the restructuring debt operation is completed, we would raise our long-term foreign currency sovereign issuer credit and issue ratings to 'CC'.
If the sovereign completes any potential restructuring operation, we would lower all of our foreign currency ratings on Venezuela to default and subsequently raise them to the 'CCC' or 'B' category. RATIONALE
On Jan. 8, 30 calendar days had passed since coupon payment was due for Venezuela's global bond due 2020, and Venezuela had not paid $45 million due to bondholders (or the bondholders had not received funds by that date). In accordance with our criteria, "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," we have lowered the issue ratings to 'D' (default) for this bond.
Overdue coupons now include the following eight issues:
- US$2.496 billion 7.75% bonds due Oct. 13, 2019
- US$2.496 billion 8.25% bonds due Oct. 13, 2024
- US$1.6 billion 7.65% bonds due April 25, 2025
- US$3 billion 11.75% bonds due Oct. 21, 2026
- US$2 billion 9.00% bonds due May 7, 2023
- US$2 billion 9.25% bonds due May 7, 2028
- US$1 billion 7.00% bonds due Dec. 1, 2018
- US$1.5 billion 6% bonds due Dec. 9, 2020