After the British agency Fitch late July it was the turn of the US Moody’s to lower the rating of the Republic of Congo, which fell a notch. At issue: Brazzaville missed the payment deadline of its eurobond end of 2007.
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Meeting on Monday, August 1, the rating committee of Congo – Brazzaville in Moody’s downgraded by one notch the rating of the country, reduced from “B2″ from “B3″ just a notch above the category of bonds with “substantial risks”.
the note of Congo – Brazzaville was also placed under review for a possible downward revision.
exceeded the grace period
the decision of the US agency comes just days after the British Fitch, and for the same reasons: the Congo -Brazzaville failed to set a deadline for its bond issue by 478 million issued in 2007, as part of the restructuring of its commercial debt vis-à-vis the London Club (private creditors of the country).
the government has missed payment of interest and principal at maturity on 30 June 2016. the authorities have also failed to do so during the period of 30 days grace, come to an end on July 30. Another term of the loan is expected in December.
According to the rating agency, the Congolese authorities explained that the June payment defect is due to an administrative error, rather than a shortage of cash, and it will be resolved shortly.
in a statement Monday, Fitch for its part considers that this constitutes evidence of “institutional weaknesses” of the country.
Not only, the 2007 eurobond is the only international bond that must manage government services, but payment was expected in June size “relatively low compared to the GDP of the country, in the order of 0, 25% “, says the rating agency. In addition, the loan has a very long maturity (22 years) and was carried out at below-market rates.
Future Risks
put under review the country’s rating, Moody’s added, will “assess the veracity of the statement of the government”, regarding the technical error. However, adds the American agency, this episode is or is not a real default on the national debt, it considers that the notes “B3″ correctly reflects the institutional profile of the issuer, given the weaknesses highlighted by this . event
the agency, however, warns that it could make a new downgrade of the country, if: a discount was imposed on bondholders in question or if investigations revealed liquidity problems tougher than expected in the finances of the Congolese government, while the oil price decline severely affect government revenues. The oil sector accounted for 43% of the Congolese government revenue in 2015, according to Moody’s.
End 2015, the external debt of Congo – Brazzaville was estimated at 34.7% of GDP to a deficit about 11.1% of GDP
. Joel Tee-Lesya
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