Moody's counts Jamaica's exchange as default

Moody's Investors Service said it considers Jamaica's debt exchange proposal for domestic creditors to be an event of default. The nation has sovereign ratings of Caa1 on both domestic and foreign-currency debt and a negative outlook.

The terms of the exchange do not include a reduction in principal, the agency said, but they specify a cut of the average coupon to around 11% from around 17% as well as an extension of the average debt maturity to about five years from two.

The agency said it had anticipated that Jamaica's long-standing commitment to honor its obligations in full and on schedule might finally break this year.

The country's rating could be upgraded once the debt exchange is completed if it proceeds as expected. Moody's noted that the debt restructuring is a precondition for the nation to receive a large combination of multilateral loans over the next two years and said that such assistance could significantly alleviate the country's liquidity constraints over the medium term.

Nevertheless, the agency said Jamaica still faces multiple risks over the near- to- medium term and, even if the exchange proceeds smoothly, the very ambitious macro-reform program that Jamaica has agreed to will be subject to considerable implementation risk.

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