Moody's drops Ecuador

Moody's Investors Service said it has downgraded Ecuador's sovereign ratings following the government's announcement that it would not honor its obligations.

Ecuador's government bond rating was downgraded to Ca with a developing outlook from Caa1 on review for possible downgrade, the agency said.

Ecuador's Caa1 country ceiling for bonds and Caa1 country ceiling for bank deposits, which had been on review for possible downgrade, were both confirmed and assigned a negative outlook, Moody's said.

"The government's decision to default is based on ideological and political grounds and is not related to liquidity and solvency issues," said Moody's vice president - senior analyst Alessandra Alecci.

"The nature of this default, Ecuador's second in the past decade, is unprecedented as it is occurring in a situation of relative macroeconomic strength, despite the recent downturn in the commodity cycle."

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