Fitch Downgrades Cyprus's LC IDR to 'Restricted Default' from 'CCC'

Fri Jun 28, 2013 12:38pm EDT

Link to Fitch Ratings' Report: CyprusLONDON, June 28 (Fitch) Fitch Ratings has downgraded Cyprus's Long-term local currency Issuer Default Rating (IDR) to 'RD' ('Restricted Default') from 'CCC' following confirmation from the Cypriot government that the exchange of a number of domestic law government bonds has been completed. KEY RATING DRIVERS The downgrade to 'RD' reflects Fitch's opinion that the exchange constitutes a distressed debt exchange (DDE) in line with its criteria and follows the downgrade of Cyprus's LC IDR to 'CCC' from 'B' on 3 June. Fitch has downgraded only the affected domestic bonds to 'D' from 'CCC' and affirmed the rest at 'CCC'. With foreign law bonds unaffected by the exchange, the Long-term foreign currency IDR has been affirmed at 'B-'with a Negative Outlook. The Short-term foreign currency IDR and the Country Ceiling have also been affirmed at 'B'. Under the exchange, domestic law bonds with a total nominal value of EUR1bn that are due to expire within the EU-IMF programme period (2013-Q116) will be replaced by new bonds with the same coupon rates but with the maturity dates of the new securities extended to outside the programme period. This transaction constitutes a DDE under Fitch's criteria, as the maturity extension at existing coupon rates represents a material reduction in terms for bondholders. RATING SENSITIVITIES The settlement date for Cypriot-law exchanged bonds is Monday 1 July. Shortly after completion of the debt exchange and the issue of new securities, Fitch will raise Cyprus's LC IDR out of 'RD' and assign ratings consistent with the agency's forward-looking assessment of Cyprus's credit profile following the distressed debt exchange. The post- exchange LC IDR and securities' ratings are likely to be low speculative grade. Contact: Primary Analyst Enam Ahmed Director +44 20 3530 1624 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Douglas Renwick Senior Director +44 20 3530 1045 Committee Chairperson Tony Stringer Managing Director +44 20 3530 1219 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Sovereign Rating Methodology', dated 13 August 2012, 'Country Ceilings' dated 13 August 2012 and 'Distressed Debt Exchange' dated 08 August 2012 are available at www.fitchratings.com. Applicable Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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