S&P cuts Sri Lanka bonds ratings to default

Global ratings agency S&P Global on Thursday cut Sri Lanka’s bonds by two notches to its lowest rating ‘D’ from ‘CC’, pushing it deeper into junk territory, following missed interest payments due on Sept. 14 and Sept. 28, 2022.

“We do not expect the government to make payments on the ISBs within 30 calendar days after their due dates,” the agency said.

The agency affirmed its ‘CCC-’ long term and ‘C’ short term local currency sovereign ratings. S&P’s outlook on the long-term local currency rating remains negative.

S&P Global Ratings affirmed its ‘SD’ long-term and ‘SD’ short-term foreign currency sovereign ratings on Sri Lanka. At the same time, it affirmed the ‘CCC-’ long-term and ‘C’ short-term local currency sovereign ratings. The outlook on the long-term local currency rating remains negative.

Sri Lanka’s external public debt moratorium prevents payment of interest and principal obligations due on the government’s ISBs. This would have affected interest payments due Sept. 14, 2022, and Sept. 28, 2022, on its ISBs maturing 2024, 2029, and 2030.

S&P foreign currency rating on Sri Lanka is ‘SD’ (selective default). The negative outlook on the local currency rating reflects a high risk to commercial debt repayments over the next 12 months in the context of Sri Lanka’s economic, external, and fiscal pressures, S&P said.

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