Jan 2005 Financial News

S&P Downgrades Grenada

Jan 04, 2005

On Dec. 30, 2004, Standard & Poor's Rating Services lowered its ratings on
Grenada's US$100 million bond due 2012 and the US$41.5 million Royal Bank
of Trinidad & Tobago (RBTT) Merchant Bank Ltd. bond due 2014 to 'D' from
'B-', following the government's failure to make its interest payments on
the bonds on Dec. 29 and 24, respectively. At the same time, Standard &
Poor's Ratings Services lowered its long-term foreign currency sovereign
rating on Grenada to 'SD' from 'B-' and its short-term foreign currency
sovereign credit rating to 'SD' from 'C'. Standard & Poor's also lowered
its long-term local currency sovereign credit rating on Grenada to 'CCC'
from 'B-'. The long-term ratings on Grenada have been removed from
CreditWatch with negative implications, where they were placed on Sept.
17, 2004. The long-term local currency rating has been assigned a negative
outlook.

The rating actions are based upon the government's announcement
yesterday that it would start a comprehensive restructuring of its
official bilateral and commercial financial external debt, estimated at
68% of GDP in 2004. Negotiations with creditors are expected to begin in
early 2005. The restructuring will include, among other debt instruments,
the aforementioned US$100 million bond and the US$41.5 million RBTT
Merchant Bank Ltd. bond.

When the debt restructuring is complete, Standard & Poor's will
revise its 'SD' rating to a rating that incorporates a forward-looking
assessment of Grenada's debt-servicing capacity.

Source: S&P