New York, June 12, 2020 — Moody’s Investors Service (“Moody’s”) has today placed the Government of Senegal’s Ba3 foreign and local currency issuer ratings and its foreign-currency senior unsecured ratings on review for downgrade. Concomitantly, Moody’s has affirmed Senegal’s Not Prime (NP) short-term foreign-currency and local-currency issuer ratings.
The decision to place Senegal’s ratings on review for downgrade reflects Moody’s assessment that the country’s participation in the G20 Debt Service Suspension Initiative (DSSI) raises the risk that private sector creditors will incur losses. The suspension of debt service obligations to official creditors alone would be unlikely to have rating implications; it provides liquidity relief at a time when Senegal’s fiscal position is under pressure as a result of the global coronavirus shock. However, the G20’s call on private sector creditors to participate in that initiative on comparable terms raises the risk of default on privately-held debt under Moody’s definition.
The government has expressly stated its commitment to comply with all of its contractual obligations vis-a-vis private sector creditors and does not intend to extend the DSSI to them. However, this contrasts with a call by the official sector for commercial creditors to contribute to debt service relief.
Consistent with Moody’s approach globally, the review period will allow the rating agency to understand the significance of the statement in the Debt Relief term sheet that private sector creditors should participate on comparable terms. The review will assess whether Senegal’s participation in that initiative will indeed be implemented without private sector participation, in which case the rating will likely be confirmed at the current level; or, if not, what lower rating would be consistent with expected losses.
All long-term ceilings for foreign-currency and local-currency deposits and debt remain unchanged at Baa1.
