(The following statement was released by the rating agency)
LONDON, November 30 (Fitch) Fitch Ratings has downgraded Mozambique’s Long-Term Foreign Currency Issuer Default Rating (IDR) to ‘RD’ (Restricted Default) from ‘CC’ and affirmed the Long-Term Local Currency IDR at ‘CC’.
The Long-Term IDRs do not have an Outlook. The Short-Term Foreign and Local Currency IDRs have been affirmed at ‘C’ and the Country Ceiling at ‘B-‘. Under EU credit rating agency (CRA) regulation, the publication of sovereign reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations.
Fitch interprets this provision as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that Fitch believes makes it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status.
The next scheduled review date for Fitch’s sovereign rating on Mozambique is due by end- April 2017, but Fitch believes that developments in Mozambique warrant such a deviation from the calendar and the rationale for this is laid out below.
KEY RATING DRIVERS
The downgrade of Mozambique’s Long-Term Foreign Currency IDR to ‘RD’ reflects the following key rating driver and its relative weight: HIGH On 21 November the Ministry of Economy and Finance published a document confirming that Mozambique failed to make a capital and coupon payment, due 23 May 2016, on the USD535m loan to state-owned enterprise Mozambique Asset Management (MAM). The document also confirms that the MAM loan is guaranteed by the Republic of Mozambique.
The arrears on the loan amount to approximately USD175.5m. In line with its criteria, Fitch therefore judges Mozambique to be in default on its sovereign obligations.
The curing of the default, such as through a debt restructuring leading to a normalisation of relations with its creditors would lead to an upgrade of the IDRs. At such time, Fitch would review the ratings of Mozambique and upgrade the ratings to a level consistent with the sovereign’s ability and willingness to service debt.
Federico Barriga Salazar
Director +44 20 3530 1242
Fitch Ratings Limited
30 North Colonnade London
+1 212 908 0897
+44 20 3530 1219
London, Tel: +44 20 3530 1103