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June 30 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has updated its Distressed Debt Exchange (DDE) Global Cross Sector Criteria covering corporates, financial institutions (including covered bonds), insurers, sovereigns and subnationals, and global infrastructure. Changes to the criteria have been minor and the update does not affect any ratings.
When considering whether a debt restructuring should be classified as a DDE, Fitch expects both of the following to apply: the restructuring imposes a material reduction in terms compared with the original contractual terms; and the restructuring or exchange is conducted in order to avoid bankruptcy, similar insolvency or intervention proceedings or a traditional payment default.
Additional nuances for banks and sovereigns are covered in more detail in the criteria report.
When an exchange or tender offer that Fitch considers to be distressed is announced, an issuer’s Issuer Default Rating (IDR) typically will be downgraded to ‘C’. Completion of the DDE typically results in an IDR being downgraded to ‘Restricted Default (RD). Shortly after the DDE is completed, an IDR will be re-rated and raised to a performing level, usually still low speculative grade.
The new report updates and replaces ‘Distressed Debt Exchange’ dated Aug. 2, 2013. The updated criteria report is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings’ Report: Distressed Debt Exchange