World renowned credit rating agency Fitch, has issued as CCC rating for the Hulhumale’ Development Corporation (HDC). HDC which was initially awarded a B+ rating at the end of 2019, the highest grade in the non-investment bracket was downgraded to CCC rating after just 2 years.
Fitch Rating’s decision to issue a CCC comes right after the rating giant issued the same grade to the Government of Maldives. According to Fitch, a CCC rating will be issued to firms, corporations and governments which has a “real possibility of defaulting”. The decision to issue a CCC rating to HDC was justified by Fitch Rating’s stating that the corporation’s Board of Directors and ultimately all its decision making process was dictated by the Government of Maldives and due to the possibility of the Maldivian Government going towards a Sovereign default, HDC itself is also at the risk of defaulting.
According to Fitch Ratings, at the end of 2018 HDC was capable of sustaining itself without the Government of the Maldives acting as its guarantor and was capable of paying the loans by itself. However, by the end of 2019 the corporation had endured massive losses and debt of which 73% was backed by the Government of Maldives. HDC is yet to issue a statement on why the corporation incurred such massive losses and debt within the span of one year without any substantial projects. It is speculated that due to the possibility of the Government of Maldives going towards a sovereign default, many such corporations will also have to endure losses and possible bankruptcy.