New York: (Business Wire)

Fitch Ratings on Thursday downgraded Jamaica’s long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘RD’ following the successful execution of the domestic debt exchange.

Fitch believes that the recent exchange constituted a coercive debt exchange (CDE) as outlined in Fitch’s global criteria report, ‘Coercive Debt Exchange Criteria’, published March 3, 2009 and available on Fitch’s web site at ‘www.fitchratings.com’.

The domestic debt exchange included foreign currency denominated instruments to which Fitch’s foreign currency rating applies.  In Fitch’s opinion, a material share (over 10 per cent) of the total central government’s foreign currency denominated debt owed to private creditors was subjected to the exchange.

Accordingly, Fitch has placed Jamaica’s foreign currency rating into ‘RD’.  Fitch has also downgraded the short-term foreign currency rating to ‘D’.  The agency notes that the foreign currency denominated securities issued in international capital markets were not affected by this debt exchange and are affirmed at ‘CCC’.

Subsequently, Fitch has upgraded Jamaica’s long-term foreign and local currency IDRs to ‘CCC’ and placed both ratings on Rating Watch Positive.  Fitch has also upgraded Jamaica’s short-term foreign currency rating to ‘C’ and affirmed the Country Ceiling at ‘B-’.

The upgrade of the sovereign ratings takes into account the successful outcome of the domestic debt exchange.  The authorities estimate that the participation rate has already reached over 90 per cent of eligible securities. This in turn will yield important fiscal savings in terms of debt service.

Fitch believes that successful outcome of the exchange is likely to lead to the approval of the USD1.3 billion IMF Stand-By programme.

“With the orderly execution of the debt exchange, the government of Jamaica has made a significant step forward in securing the IMF funding, which is critical for the country to support its international liquidity situation and move forward with a package of reforms to buttress its fiscal situation and investor confidence,” said Shelly Shetty, senior director in Fitch’s Sovereign Group.

Fitch would likely upgrade Jamaica’s sovereign ratings into the ‘B’ category provided that the government of Jamaica secures the approval of the USD1.3 billion loan from the IMF and after Fitch has reviewed the expected improvement in the government’s external and fiscal position.