The organization which describes itself as the voice of the local business community has said the decision by the Mia Mottley administration to default of its foreign debt payment, and the subsequent downgrade by rating agency Standard & Poor’s, had taken a toll on businesses here.
In a statement issued today the Barbados Chamber of Commerce and Industry (BCCI) said while it anticipated the downgrade, “the ramifications of these downgrades make it increasingly difficult for businesses who rely on imports to continue their operations, as their credit worthiness and by extension their respective payment terms, in external markets are negatively impacted”.
In its latest assessment of Barbados published last week, S&P lowered the issue-level ratings on this country’s global bonds to ‘D’ or default.
S&P said the bonds, which are due next year and in 2022 were previously rated at ‘CC’. That is junk bond where the issuer, in this case Barbados, is at greater risk of default than a ‘CCC’-rated issue and less than a ‘C-rated issue, if business, financial or economic conditions change measurably.
S&P blamed placing the bonds in default territory on missed payments by Government.
The BCCI said in its statement today it supported Government’s ongoing discussions with the various stakeholders and external agencies on the state of the economy, but it called for quick action to ensure “the right decisions are made and quickly”.
“The Government needs to return as soon as possible to a position where it meets its obligations to creditors and service providers alike,” the near 200-year-old organization said, adding that it had long held the view that Government needed to make “some difficult and possibly unpopular” decisions to return the economy to investment grade.
It added that “the reality that faces the country today is that these decisions need to be made in the short term to protect the future that we all seek for Barbados”, while reiterating that it stood “shoulder to shoulder with the country to ensure that these decisions are made in the interest of all”.
Government decided on June 1 to suspend its debt payments to external commercial creditors and to ask local creditors to roll over principal maturities until it reaches an agreement with its creditors.
This led S&P to lower its short and long-term local currency sovereign issuer credit ratings to ‘SD’ or “selective default” – down from ‘CC’ and ‘C’.
‘SD’ is where a sovereign nation enters “selective default” when it elects to delay repayment of some of its financial obligations while fully honouring others. The idea is that eventually everyone gets paid somehow.
S&P also affirmed its short and long-term foreign currency credit ratings on the country and its default ratings on the island’s 6.625 per cent notes due in 2035 and 7.25 per cent notes due in 2021.
“S&P Global Ratings affirmed its ‘CC’ local currency issue-level ratings on debt for which Barbados remains current. Finally, S&P Global Ratings affirmed its ‘CC’ transfer and convertibility assessment on the country,” added the ratings agency.
So with these latest bonds default, Barbados’ overdue international coupons now include US$190 million at 6.625 per cent due on December 5, 2035; US$150 million at 7.25 per cent due December 15, 2021; US$200 million, at seven per cent due August 4, 2022 and US$40 million, at 7.8 per cent due August 6, 2019.
S&P noted that its selective default long and short-term local currency ratings reflect Government’s “automatic” principal payment rollover of its short-term local currency treasury bills, which it considered tantamount to default in accordance with its criteria.