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S&P downgrades El Salvador
S&P said it lowered the long-term foreign- and local-currency sovereign credit ratings on the Republic of El Salvador to SD (selective default) from CCC-.
The agency also said it removed the ratings from CreditWatch with negative implications, where they were placed on April.
S&P also said it lowered the short-term ratings to SD (selective default) from C and affirmed the issue credit rating on the foreign-currency senior unsecured debt at CCC-.
The AAA transfer and convertibility assessment is unchanged.
El Salvador's Congress recently failed to approve a budgetary allocation necessary to cover payment of financial commitments for pension-related debt, S&P said.
As a result, the government missed payments on financial obligations coming from the Certificates for Pension Investments (CIPs) due between April 7 and April 10, adding up to $28.8 million and set to rise to a total of $55.2 million at the end of this month, the agency said.
S&P also said it lowered the issuer credit ratings to SD because the government did not make the missed payments during the five business days imputed as a grace period.
The agency also said it affirmed the existing issue credit ratings on the foreign-currency senior unsecured debt at CCC- because this debt is not in default.
The ratings reflect El Salvador's long-standing monetary and fiscal rigidities, poor growth prospects and the political polarization that contributed to the recent missed debt payments, S&P said.
The ability of the government and opposition parties to reach agreement on fiscal policy and improve the sovereign's access to liquidity will be keys to the future credit rating, the agency said.
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