Rating Actions on November 17
November 18, 2020
Fitch placed Guatemala's BB- rating on rating watch negative.
Reasons: The country missed a coupon payment on its 4.5% 3may2026 bond on November 3. The sovereign is going through a commercial dispute with the US-based electric distribution company TECO Guatemala Holdings (TECO). There is a 30-day grace period until December 3. If the sovereign fails to pay, Fitch will consider the event a default.
Also, Fitch downgraded the issue rating on the affected bond to 'C'.
Guatemala couldn't pay the coupon as its fiscal agent did not provide the payment to bondholders. The case was caused by a restraining notice directed at the government's account at the Bank of New York Mellon. Previously, Washington D.C. obligated the country to pay TECO $35.4 million for an arbitration, which started in 2009.
Currently, Guatemala has upcoming coupon payments totaling $55m on other international bonds due by November 30 and $31m by December 5.
The claim started due to electricity tariffs based on the Central America-United States Free Trade Agreement (CAFTA). Guatemala's General Electricity Law and subsequent regulation adopted in 1996 introduced a tariff review system, which was to be recalculated every 5 years. The parties argue about the setting of the tariff in 2008-2013. TECO says the country's government refused to raise electricity prices for political reasons.
Issue — Guatemala, 4.5% 3may2026, USD
Country of riskGuatemala
Redemption (put/call option)
М/S&P/F— / — / —
Company — Guatemala
Full nameRepublic of Guatemala