HONG KONG (Standard & Poor's) June 17, 2014--Standard & Poor's Ratings Services today assigned its 'B' long-term and 'B' short-term issue ratings to a proposed medium-term notes (MTN) program under which Trade and Development Bank of Mongolia LLC (TDB; B/Negative/B) may issue notes up to a maximum of US$1 billion.
We also assigned our 'B' long-term issue rating to a proposed drawdown under the program. The ratings are subject to our review of the final issuance documentation.
We have equalized the issue ratings with the issuer credit ratings on TDB. All notes issued under the program will rank pari passu among themselves and at least pari passu with all other present and future unsecured and
unsubordinated obligations of the bank, except obligations required to be preferred by law.
The program and the drawdown are backed by a letter of support (LoS) issued by the government of Mongolia, acting through the Ministry of Finance. We do not equalize the rating on the MTN program with the sovereign credit rating on Mongolia due to uncertainty over the timeliness of payment if the government
is called to honor the LoS. The LoS is an indemnity and not a guarantee. Moreover, the size of the program that the LoS supports is sizable compared to Mongolia's fiscal revenue and government deposits at banks, and there is a risk that parliament may challenge the appropriateness of the LoS, in our view.
TDB may issue index-linked notes under the program. Under Standard & Poor's criteria, we do not rate bonds if principal payments are linked to fluctuations in equity or commodity prices, or equity or commodity indices.