By Manuel Orozco
& Lisa M Schineller, PhD
Standard and Poor's
MEXICO CITY -- On Jan. 2, 2018, S&P Global Ratings lowered its issue rating on the Bolivarian Republic of Venezuela's global bond due 2018 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. Other foreign currency senior unsecured debt issues not currently rated 'D' are rated 'CC'. CREDITWATCH
Our CreditWatch negative 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 Dec. 31, 30 calendar days had passed since coupon payment was due for Venezuela's global bond due 2018, and Venezuela had not paid $35 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 these two bonds.
Overdue coupons now include the following seven 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
Another coupon payment is overdue, but within its grace period. We could lower our ratings on the following issue to 'D' if the government fails to pay within the stated grace period:
US$1.5 billion 6% bonds due Dec. 9, 2020