International rating agency Moody’s Monday downgraded Lebanon’s issuer rating from Ca to C due to the country’s enormous financial and economic woes.
In the expected move, the agency also downgraded the senior unsecured Medium Term Note (MTN) Program rating to (P)C from (P)Ca and affirmed the other short-term rating at (P)NP.
“The C rating reflects Moody’s assessment that the losses incurred by bondholders through Lebanon’s current default are likely to exceed 65 percent,” it said in its report in Lebanon. “The country is steeped in an economic, financial and social crisis, which very weak institutions and governance strength appear unable to address.”
The report added that the collapse of the currency in the parallel market and the concomitant surge in inflation fuel a highly unstable environment.
“In the absence of key steps toward plausible economic and fiscal policy reform, official external funding support to accompany a government debt restructuring is not forthcoming. The decision not to assign an outlook to the rating is based on the very high likelihood of significant losses for private creditors and the fact that C is the lowest rating in Moody’s rating scale,” Moody’s said.
It noted that Lebanon’s long-term foreign currency bond ceiling remains unchanged at Ca while the foreign currency deposit ceiling has been lowered to C from Ca previously.
It added that the long-term local-currency bond and deposit ceilings have been lowered to Caa2, respectively, from Caa1 previously. The short-term foreign currency bond and deposit ceilings remain Not Prime (NP).
Moody’s argues that Lebanon is steeped in a severe economic, financial and social crisis, with the level of economic activity plunging at a fast rate, the currency plummeting in the parallel exchange rate market, inflation skyrocketing, and an increasing part of the population without a job or income prospects.