Moody's lowers El Salvador

Moody's Investors Service said it downgraded El Salvador's issuer and senior unsecured debt ratings to Caa1 from B3 and changed the outlook to stable from negative.

The downgrades reflect the recent missed payments on pension-related bonds, which signal a higher risk that the political impasse in the legislative assembly could lead to missed payments on government debt obligations, Moody's explained.

The downgrades also consider the failure of El Salvador to reach an agreement about issuing long-term debt raises government liquidity risks and tests local banks' capacity to absorb additional short-term debt, which already is at record high levels, the agency said.

The stable outlook reflects a view that the Caa1 rating captures the balance of risks to El Salvador's sovereign credit profile, Moody's said.

El Salvador's long-term foreign-currency bond and deposit ceilings also were lowered to B2 from B1 and its short-term foreign-currency bond and deposit ceilings are unchanged at not-prime.

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