S&P deems El Salvador to be 'selective default'

US ratings agency Standard & Poor's has downgraded El Salvador's credit standing to "selective default" (SD) after the country's parliament approved a reform to restructure sovereign debt racked up over pensions. The restructuring means El Salvador has effectively "selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner," according to the agency.
S&P said in a statement it had as a consequence downgraded the country's long-term credit rating and short-term rating in local currency from, respectively, CC and C, to SD. The restructuring approved by lawmakers last Thursday allows the government more time to repay $91 million owed to private pension funds, extending the terms of sovereign coupons from 25 years to 30 years, along with a grace period and modified interest rates.