News Americas, NEW YORK, NY, Tues. Dec. 19, 2023: Suriname, a member of the Caribbean Community, (CARICOM), has received upgraded ratings from Moody’s after successfully restructuring its debt.
Holders of Suriname’s two Eurobonds, which had been in default since the end of 2020, were offered new debt instruments worth US$660 million and an oil-linked security in exchange for their defaulted debt. This exchange applied to holders of Suriname’s notes due in 2023 and 2026. Suriname has also reached restructuring agreements with several official creditors, although agreements with some other commercial domestic and foreign creditors for smaller debt amounts are still being finalized.
As a result of these developments, S&P Global Ratings raised its long- and short-term foreign and local currency sovereign credit ratings on Suriname from ‘SD’ (selective default) to ‘CCC+/C’ on December 6, 2023. The outlook for the long-term ratings is stable.
The stable outlook reflects the government’s commitment to fiscal reform and macroeconomic stabilization, along with the completion of the debt restructuring. However, it also considers the risks associated with developing institutions and governance weaknesses, including debt management.
S&P Global Ratings has outlined possible scenarios for Suriname’s ratings. In a downside scenario, the ratings could be lowered if expected financing from multilateral lending institutions fails to materialize or if other policy or administrative developments increase the likelihood of another default. In an upside scenario, the ratings could be raised if the government continues to make progress in concluding restructuring agreements with creditors, meets the conditions of multilateral lending institutions, strengthens debt management, and implements proactive economic policies that reduce the likelihood of another commercial debt payment default.
The ‘CCC+’ long-term sovereign ratings for Suriname indicate its dependence on favorable economic conditions to meet its financial commitments. The ratings also take into account factors such as high inflation, a challenging socio-political environment, and vulnerabilities in the financial sector.
Suriname’s recent debt restructuring follows missed payments on commercial debt and subsequent restructuring announcements in 2020 and 2021. S&P Global Ratings upgraded Suriname’s long-term rating to ‘CCC+’ following the successful debt exchange, which addressed the government’s outstanding U.S. dollar bond debt. The restructuring extended the maturities of the bonds to 2033 and included an accrued interest rate of 7.95%, with a payable rate of 4.95% before 2026. Principal payments on the bonds are not due until January 2027. Additionally, an oil-linked security with a notional amount of US$314.7 million was introduced, payable only if Suriname receives oil royalties from offshore Block 58. Bondholders will receive a share of the yearly oil royalties from Block 58 after the government receives US$100 million in royalties.
This debt exchange is expected to be the final resolution for the 2023 and 2026 bonds, and it reduces the near-term litigation risk related to future debt service.