RATING ‘PREMATURE’

THE Government of Grenada has described the decision by Standard and Poor’s to lower foreign currency sovereign credit ratings on Grenada to ‘SD’ from ‘B-/B’ as premature.

“Government considers the action by Standard & Poor’s as premature considering the terms of the agreement for the 2025 Notes, which provide a grace period of 30 days after the due date and the notice duly issued by Government to note-holders before the due date. This 30-day grace period has not yet expired,” said a statement from Government on Tuesday following the announcement on Monday.

“Notwithstanding yesterday’s rating action by Standard & Poor’s, the Government of Grenada wishes to confirm that timely payment of Grenada’s Treasury Bills on the Regional Government Securities Market (RGSM) will continue as normal,” said the statement from Ministry of Finance, which said that Government fully understands the importance of the RGSM for Grenada and other member governments of the Eastern Caribbean Currency Union and is deeply committed to the RGSM.

In 2005, following the devastation caused by Hurricanes Ivan and Emily, Grenada undertook debt restructuring of its long-term liabilities, however, Grenada’s treasury bills on the RGSM were unaffected.

Yet again, throughout the difficult years of the recession 2008-10, Grenada met all its obligations on the RGSM.

The Government of Grenada confirms to all investors that it will continue to meet its obligations as and when they fall due on the Regional Government Securities Market.

Standard and Poor’s said that it was lowering the local currency sovereign credit ratings to ‘CCC+/C’ from ‘B-/B’ because of the severe liquidity constraints the country is facing.

“The outlook on the long-term local currency rating is negative, reflecting downside risks to the ratings if liquidity pressures were to intensify,” said the international rating agency.

“The downgrade to ‘SD’ follows the Government’s failure to pay the coupon due September 15, 2012, on its US$193 million bond due in 2025. In its September 12, 2012, statement to bondholders, the government of Grenada stated its intention to use its best efforts to pay the coupon within a 30-day grace period,” justifies the agency.

“However, according to our criteria, we consider an obligation in default unless payment is made within five business days of the due date, regardless of any grace period.” (LS)