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The international credit rating highlighted that there have been three sovereign payment failures since the beginning of the year: Argentina, Ecuador and Lebanon are behind with their public debt service obligations.
This means that the number of government debtors who filed for bankruptcy has already set the annual record so far: Three of Fitch’s qualified sovereign debtors in 2017, El Salvador, the Republic of the Congo, and Venezuela, also fell behind on government debt payments.
However, analysts at Fitch Ratings in London predict that more government failures are expected this year, based on the rating dynamics since the beginning of the year, which means that the number of delinquent government debtors will exceed the previous annual record. .
To support this expectation, the credit rating agency notes that it has made 29 sovereign downgrades in just four months this year, which is also a record.
The net balance of the negative outlook for sovereign debt ratings is also recorded, which points to the possibility of a downgrade, currently 28 after 4 measures in late 2019.
The company also said it maintains a sovereign risk rating of “CCC” or lower for five sovereign debtors.
According to Fitch, within the sovereign debt rating band “CCC / CC / C”, the average annual rate of government debt payments was 26.5 percent for the entire period 1995-2019, and 38.5 percent in a cumulative average of five years.
Under Fitch Ratings’ final rating methodology, a “CCC” sovereign rating indicates significant debt risk and the actual possibility of repayment bankruptcy, and a “CC” rating indicates very high debt risk and suggests that some bankruptcy form for refund.
Based on historical experience, all of this suggests that more state bankruptcies are expected in 2020, Fitch said in a study Tuesday.
The credit rating agency emphasized that bankruptcies involving sovereign debtors are relatively rare: The company has registered only 23 sovereign bankruptcies since it began rating sovereign debt liabilities in the mid-1990s.
According to a recent study by another credit rating agency, Moody’s, the severe economic impact of the new coronavirus epidemic has also raised a record number of companies that could lose their investment recommended debt rating.
According to Moody’s, the number of non-financial services companies on the company’s global corporate list, which is no longer recommended for investment, i.e., the high-yield speculative rating, has increased from 26 to 96 in the first quarter of this year. lane limit.
The number of companies directly at risk of becoming a “fallen angel,” that is, losing the recommended investment rating, has increased from 43 to 76 on Moody’s global rating list; This is also a record.
Under Moody’s rating methodology, the rating of borrowers who are still rated by investors but are directly threatened with losses is “Baa3” at the bottom of the investment recommendation band, with a negative outlook or a negative registration status indicating the possibility of a downgrade.
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