Moody’s downgrades Venezuela

Moody's Investors Service said it downgraded the Government of Venezuela's foreign currency and local currency issuer ratings, foreign and local currency senior unsecured ratings, and foreign currency senior secured rating to C from Caa3.

Concurrently, the agency downgraded the foreign currency senior unsecured medium-term note program to provisional C from provisional Caa3.

The outlook was changed to stable from negative.

Moody’s said the first key driver underpinning the downgrade is its expectation that the continuing erosion of Venezuela's payment capacity will lead to heavy losses to bondholders, with ongoing defaults on interest payments on various bonds compounded by upcoming principal maturities.

In addition, the agency explained, the limits on Venezuela's ability to restructure its debt posed by current U.S. sanctions that prevent U.S. investors from accepting new debt instruments under a potential debt exchange, which will further exacerbate losses.

In a related decision, Moody's lowered Venezuela's long-term country ceilings: the local-currency country ceilings for bonds and bank deposits to Ca from Caa2; the foreign-currency bond ceiling to Ca from Caa3; the foreign-currency bank deposit ceiling to C from Ca. The short-term foreign currency bond and deposit ceilings remain unchanged at Not-Prime (NP).

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