COLOMBO, July 6 (Xinhua) -- Fitch Ratings downgraded Sri Lanka's Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to "C" from "CC."
Issuing a press release on Wednesday, the leading provider of credit ratings said the country's issue ratings on local-currency bonds have also been downgraded to "C" from "CC."
Meanwhile, Fitch affirmed the Long-Term Foreign-Currency (LTFC) IDR at "RD" (Restricted Default) and the Country Ceiling at "B-."
Fitch said that the downgrade of Sri Lanka's LTLC IDR reflects its view that a sovereign local-currency debt restructuring process has begun, as parliament approved the government's domestic debt restructuring plan on July 1.
The press release said that in Fitch's view, the proposed domestic debt optimization (DDO) strategy will qualify as a distressed debt exchange (DDE) under its criteria, as it entails a material reduction in terms and is needed to avoid a traditional payment default.
"We will downgrade the LTLC IDR to 'RD' upon closing of the exchange offer and following confirmation that the exchange will be executed. The government plans to complete the exchange within July," Fitch said.
Fitch Ratings on Tuesday said that the Sri Lankan government's domestic debt restructuring proposal was a significant step in resolving uncertainties in the local banking sector. ■