Reuters logo
Fitch: Crisis Countries Take Two Years to Reach Rating Trough
October 10, 2017 / 12:06 PM / 2 months ago

Fitch: Crisis Countries Take Two Years to Reach Rating Trough

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Sovereign Rating Crises and Recoveries here LONDON, October 10 (Fitch) Fitch Ratings says sovereigns that have experienced multiple rating downgrades take an average two years to reach the ratings trough and have a high likelihood of suffering further downgrades. However, strong rating revivals are possible once countries turn the corner on to a recovery path. Fitch analysed 37 episodes of sovereign 'rating crises' over 1997-2017 in which there were at least three notches of downgrades within three calendar years. In such crisis cases, the average downgrade was 5.8 notches. Three-quarters of countries suffering three rapid downgrades had at least one further downgrade. The sovereign suffering the greatest number of notch downgrades was Greece (2009, year of first downgrade) with a total of 14, followed by Korea (1997) and Cyprus (2011) each with 12. Eleven of the episodes resulted in defaults on the Long-Term Foreign Currency ratings. While the average time taken to reach the ratings trough (the last downgrade) was two years after the year of the first downgrade (eg first downgrade in 2008, trough in 2010), seven countries hit the bottom very quickly in the year of the initial downgrade. The longest down-cycle is eight years for San Marino (from 2009 to 2017). Every country where the crisis started before 2008 has recovered at least one of its lost rating notches. Ten have now fully recovered. The average recovery was 5.2 notches in the 10 years after the start of a crisis. Korea (1997) has achieved the greatest ratings revival within the 10 years following a crisis, recovering 11 out of 12 lost notches. Uruguay (2012) and Russia (1998) also had very strong recoveries. Of the 23 still Fitch-rated sovereigns hit by rating crises since 2007, 15 sovereigns have already benefited from at least one upgrade. Of non-defaulting countries, the strongest recoveries have been in Iceland (2007) and Latvia (2007) with four notches, followed by Cyprus (2011) with three notches, and Lithuania (2008) and Ireland (2009) with two. Iceland (A-), Greece (B-), Spain (BBB+), Portugal (BB+) and Cyprus (BB-) are all on Positive Outlook, signalling further upgrades are likely. Seven of the countries were downgraded again in 2016 or 2017 and have not necessarily reached a ratings trough. Of those, Bahrain (BB+), Brazil (BB) and Suriname (B-) are on Negative Outlook, signalling a further downgrade is more likely than not. El Salvador does not have an Outlook as it is rated 'CCC', while Mozambique remains in default. Rating recoveries are not necessarily unidirectional: Venezuela (2002), Jamaica (2008), Greece (2009) and Republic of Congo (2016) all suffered further downgrades after an initial upgrade, with Jamaica and Congo defaulting a second time. The average downgrade for developed markets (DMs) was 7.6 notches exceeding the 5.1 notches for emerging markets (EMs), partly reflecting higher starting points and the extreme shock of the eurozone crisis. DMs have also been slower to recover from rating crises than EMs. Rating recoveries are slower where a crisis leaves a legacy of high public or external debt, sizeable bad debt in the banking system or enduring political fault lines. The report, "Sovereign Rating Crises and Recoveries", is available on www.fitchratings.com or by clicking the link above Contact: Ed Parker Managing Director +44 20 3530 1176 Fitch Ratings Limited 30 North Colonnade London, E14 5GN James McCormack Managing Director +44 20 3530 1286 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com ALL 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below