Moody’s downgrades The Bahamas to Ba2, changes outlook to negative
Moody's Investors Service has downgraded The Bahamas' long-term issuer and senior unsecured ratings by two notches to Ba2 from Baa3.
Moody's also changed the outlook to negative.
The disappointing but not surprising downgrade comes two months after Moody’s placed The Bahamas under review for downgrade.
In April, credit ratings agency Standard and Poor’s lowered The Bahamas’ sovereign credit rating from BB+ to BB as a result of the economic fallout from COVID-19. S&P also downgraded the country’s transfer and convertibility assessment one notch.
The Bahamian economy has been limping along over the last three months due to the coronavirus pandemic, which saw the government shut down borders and all non-essential businesses.
Businesses have now reopened as The Bahamas enters phase five of its reopening. However, major hotels like Baha Mar and Sandals Royal Bahamian have pushed back their reopening dates.
Baha Mar plans to make 1,200 employees redundant and Grand Lucayan resort confirmed it will make 116 employees redundant, with more redundancies predicted.
According to Moody’s, “the key drivers behind the rating action were; the large shock caused by the coronavirus crisis will weigh significantly on economic and fiscal strength over the medium term and funding conditions will become more constrained for the government because of larger financing needs.”
“The negative outlook reflects Moody's expectation that given the severity of the coronavirus shock, the government's credit profile will continue to be exposed to downside risks related to the recovery of the tourism sector,” Moody’s said.
Moody’s also pointed to the Minnis Administration’s higher borrowing requirements for the 2020/2021 fiscal year, and predicted the government could face more pronounced liquidity challenges than currently expected.
The government plans to borrow $1.3 billion as a result of Covid-19 and Hurricane Dorian.
Moody's also lowered The Bahamas' long-term foreign-currency bond ceiling to Baa3 from Baa1 and long-term foreign-currency deposit ceiling to Ba3 from Baa3.