International ratings agency, Fitch has downgraded Suriname’s Long-Term Foreign Currency Issuer Default Rating (IDR) to ‘RD’ (Restricted Default) from ‘C’.

In addition, Suriname’s Short-Term Foreign Currency IDR is affirmed at ‘C’. The two issue ratings on Suriname’s US$550 million notes, due 2026 and US$125 million notes, due 2023 on which the government has defaulted were downgraded to ‘D’ from ‘C’ and then withdrawn for the following reason: Bankruptcy of the rated entity, debt restructuring or issue/tranche default.

The downgrade of Suriname’s IDR to ‘RD’ reflects the non-payment of US$49.8 million of rescheduled external debt service on Suriname’s 2023 and 2026 notes due March 31. This marks an event of default under Fitch’s criteria with respect to the sovereign’s IDR as well as the issue ratings of the affected securities.

Another US$25.4 million semiannual interest payment is due April 26 on the Suriname 2026 notes. The government of Suriname continues to negotiate with creditors for a comprehensive restructuring of its external bonds.

Suriname seeking IMF help

The national authorities are concurrently pursuing a funded International Monetary Fund (IMF) program, but did not reach an agreement in time to trigger an extension of the debt service payment date by one month, as set out in the second consent solicitation terms agreed in December 2020.

In response to the government of Suriname’s consent solicitation issued March 17, the third since June 2020, note holders highlighted concerns that have limited negotiation progress, and on March 31, the government of Suriname extended the consent solicitation response deadline to April 8.

As a consent solicitation would result in a further standstill of debt service amid the broader debt restructuring process rather than normalize payments to bondholders, Fitch expects the Long-Term Foreign Currency IDR to remain at ‘RD’ even if creditors agree to it.

Should Suriname reach an agreement with note holders resulting in a comprehensive bond restructuring that supports Suriname’s near-term payment capacity, this would constitute a “distressed debt exchange” under Fitch’s Sovereign Rating Criteria.

If this happens it would result in the upgrade of the sovereign’s ratings out of ‘RD’ to a level consistent with its credit fundamentals on a forward-looking basis.