Venezuela Cut Deeper Into Junk by Fitch on `Probable' Default

By Ben Bartenstein

• Nation’s senior debt downgraded to CC from CCC by Fitch
• Ratings company says U.S. sanctions increase default odds

(Bloomberg) --

The world’s riskiest credit continued its downward spiral after Fitch Ratings lowered Venezuela’s grade deeper into junk, saying additional U.S. sanctions increase the probability of non-payment.

Fitch reduced the nation’s long-term foreign and local currency ratings to CC, just two notches from default, from CCC on Wednesday. S&P Global Ratings and Moody’s Investors Service also rank the country at speculative levels.

"The expected reduction in the international reserve position in the context of sanctions will severely test the government’s capacity and willingness to continue with timely debt service," Fitch analyst Richard Francis wrote in a statement.

Speculation on a Venezuelan default is mounting as international reserves tumble to a 15-year low and U.S. sanctions further restrict the nation’s financing options. The implied probability of the country missing a payment over the next 12 months rose to 64 percent from 63 percent the month prior, according to credit-default swaps data compiled by Bloomberg. The odds of a credit event over the next five years increased to 97 percent.

Related ticker:
PDVSA VC (Petroleos de Venezuela SA)

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