S&P lowers Sri Lanka's sovereign rating to "Select Default" grade

Country misses Sovereign Bond interest payments

Global rating agency Standard and Poor’s today lowered long-term foreign currency sovereign credit rating on Sri Lanka to “SD” (selective default) from “CC” as the crisis-hit Island nation missed an interest payment on bonds.

On April 18, Sri Lanka missed interest payments on its $1.25 billion international sovereign bonds maturing in 2023 and 2028.

“We do not expect the government to make the coupon payments within 30 calendar days after their due dates,” S&P said in a statement.

At the same time, it also lowered ratings on bonds to 'D' (default) from 'CC'. However, it affirmed 'CCC-/C' rating for local currency sovereign ratings on Sri Lanka. The outlook on the local currency ratings remains negative.

The negative outlook reflects the high risk that the government could restructure its local currency debt amid the country's economic, external, and fiscal pressures.

It could lower the local currency ratings if there are indications of non-payment or restructuring of Sri Lankan rupee-denominated obligations, the agency added.

It could revise the outlook to stable or raise the local currency ratings if it perceives that the likelihood of the government's local currency debt being excluded from any debt restructuring has increased. This could be the case if, for example, the government receives significant donor funding which gives it some time to implement immediate and transformative reforms.

S&P said it would raise our long-term foreign currency sovereign issuer credit rating upon completion of the government's bond restructuring. The rating would reflect Sri Lanka's post-restructuring creditworthiness.