Fitch Ratings has placed Mozambique’s ‘CCC’ Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) and debt instruments Under Criteria Observation (UCO) following the conversion of the agency’s exposure draft of its Sovereign Rating Criteria to final criteria.
A summary of the changes introduced by the new criteria is available at https://www.fitchratings.com/research/sovereigns/fitch-ratings-publishes-final-sovereign-rating-criteria-11-07-2022
The UCO indicates that ratings may change as a direct result of the final criteria. It does not indicate a change in the underlying credit profile, nor does it affect existing Outlooks.
We will resolve the UCO status within six months. The outcome will depend on Fitch’s assessment of the appropriate notching based on the new criteria. Not all issuers on UCO will have a rating change upon resolution.
EU CALENDAR DEVIATION DISCLOSURE
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 reason we believe makes it impossible for us to wait until the next scheduled review date. The next scheduled review date for Fitch’s sovereign rating on Mozambique will be 26 August 2022, but Fitch believes that the publication of the exposure draft warrants the deviation because Fitch is required to place the ratings under observation as a result of the publication of the final criteria.
KEY RATING DRIVERS
Introduction of Modifiers at ‘CCC’: The recently published Sovereign Rating Criteria introduce +/- modifiers in the ‘CCC’ category. Sovereigns rated ‘CCC’ could experience a one-notch rating change, potentially migrating from ‘CCC’ to ‘CCC-‘ or ‘CCC+’.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Existing rating sensitivities continue to apply. For more details, see the most recent rating action commentary (RAC) “Fitch Affirms Mozambique at ‘CCC'” published 11 March 2022, which can be found at https://www.fitchratings.com/research/sovereigns/fitch-affirms-mozambique-at-ccc-11-03-2022
Factors that could, individually or collectively, lead to positive rating action/upgrade:
See RAC dated 11 March 2022.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
For more details, see RAC dated 11 March 2022.
Additional information is available on www.fitchratings.com
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
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