Moody's adjusts country ceilings for Thailand, Oman and Mongolia
Singapore, July 22, 2013 -- Moody's Investors Service has today adjusted the local currency (LC) country risk and foreign currency (FC) bond and deposit ceilings for Thailand, Oman, and Mongolia. The sovereign bond ratings are not affected by the changes in the ceilings.
RATINGS RATIONALE
The change in ceilings mean that the highest rating that can be assigned to a domestic issuer in these countries, or to a structured finance security backed by local currency receivables, is now as follows:
-- THAILAND
1) The long-term LC bond ceiling was changed to A1 from Aa2;
2) The long-term LC deposit ceiling was changed to A1 from Aa2;
3) The long-term FC bond ceiling remains at A2, but the short-term FC bond ceiling was changed to P-1 from P-2;
4) The long-term FC deposit ceiling remains at Baa1 and the short-term FC deposit ceiling remains unchanged at P-2.
Moody's decision to adjust the LC country ceilings for Thailand is based on application of the rating agency's Local Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Thailand's Sovereign Bond rating of Baa1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Thailand's case, these consist of a 'moderate' assessment of Economic Strength, a 'moderate' assessment of Institutional Strength and a 'low shaded to moderate' assessment of susceptibility to political, economic or institutional event risks.
The adjustment in the short-term FC bond ceiling stems from Moody's assessment of low transfer and convertibility risks given the country's ability and willingness to service both its public and private cross-border debt obligations. This view is supported by Thailand's healthy external liquidity position, characterized by low external debt and ample foreign exchange reserves.
-- OMAN
1) The long-term LC bond ceiling was changed to Aa3 from Aa2;
2) The long-term LC deposit ceiling was changed to Aa3 from Aa2;
3) The long-term FC bond ceiling was changed to Aa3 from Aa2;
4) The long-term FC deposit ceiling remains at A1;
5) The short-term FC bond and deposit ceilings remain unchanged at P-1.
Moody's decision to adjust the LC country ceilings for Oman is based on application of the rating agency's Local Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Oman's Sovereign Bond rating of A1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Oman's case, these consist of a 'high' assessment of Economic Strength, a 'high' assessment of Institutional Strength and a 'moderate' assessment of susceptibility to political, economic or institutional event risks.
In particular, bringing Oman's LC country ceilings closer towards the government's A1 bond rating reflects: 1) the currency peg to the US dollar which limits monetary policy flexibility; 2) the high degree of government intervention in the economy and, related to this, 3) the high dependence of government finances and overall economic performance on oil price movements.
FC ceilings were adjusted following Moody's methodological guidance to place the FC ceiling at the lower of either the LC country risk ceiling or the assessment resulting from the moratorium risk assumptions. Moody's notes, however, that Oman's foreign exchange liquidity remains strong, supported by current account surpluses and sizeable foreign exchange assets.
-- MONGOLIA
1) The long-term LC bond ceiling was changed to Ba3 from Baa1;
2) The long-term LC deposit ceiling was changed to Ba3 from Baa2;
3) The long-term FC bond ceiling was changed to Ba3 from Ba2;
4) The long-term FC deposit ceiling remains at B2;
5) The short-term FC bond and deposit ceilings remain unchanged at NP
Moody's decision to adjust the LC country ceilings for Mongolia is based on application of the rating agency's Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Mongolia's Sovereign Bond rating of B1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Mongolia's case, these consist of a 'low' assessment of Economic Strength, a 'low' assessment of Institutional Strength and a 'high' assessment of susceptibility to political, economic or institutional event risks.
Moody's decision to adjust the LC country ceilings for Mongolia is also influenced by specific risks inherent in the country's operating environment: a history of boom-bust economic cycles and uncertainties affecting the predictability of the foreign investment regime.
FC ceilings were adjusted to reflect Moody's assessment of moratorium risks given the country's ability and willingness to service both its public and private cross-border debt obligations. The ceiling takes into account Mongolia's sizeable financing needs on the one hand, and its traditionally open economy with few capital controls on the other.
METHODOLOGY
Moody's country ceilings capture externalities and event risks that arise unavoidably as a consequence of locating a business in a particular country and that ultimately constrain domestic issuers' ability to service their debt obligations. As such, the ceiling encapsulates elements of the economic, financial, political, and legal risks in a country, including political instability, the risk of government intervention, the risk of systemic economic disruption, severe financial instability risks, currency redenomination, and natural disasters among other factors, that need to be incorporated into the ratings of even the strongest domestic issuers. The ceiling caps the credit rating of all issuers and transactions with material exposure to those risks -- in other words, it affects all domestic issuers and transactions other than those whose assets and revenues are predominantly sourced from or located outside of the country, or which benefit from an external credit support.
The methodology used in this action is Local-Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations published in March 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com/disclosures for disclosures on significant Moody's shareholders and on certain relationships between Moody's, its shareholders and/or rated issuers.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Thomas J Byrne
Senior Vice President
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Bart Jan Sebastian Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
RATINGS RATIONALE
The change in ceilings mean that the highest rating that can be assigned to a domestic issuer in these countries, or to a structured finance security backed by local currency receivables, is now as follows:
-- THAILAND
1) The long-term LC bond ceiling was changed to A1 from Aa2;
2) The long-term LC deposit ceiling was changed to A1 from Aa2;
3) The long-term FC bond ceiling remains at A2, but the short-term FC bond ceiling was changed to P-1 from P-2;
4) The long-term FC deposit ceiling remains at Baa1 and the short-term FC deposit ceiling remains unchanged at P-2.
Moody's decision to adjust the LC country ceilings for Thailand is based on application of the rating agency's Local Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Thailand's Sovereign Bond rating of Baa1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Thailand's case, these consist of a 'moderate' assessment of Economic Strength, a 'moderate' assessment of Institutional Strength and a 'low shaded to moderate' assessment of susceptibility to political, economic or institutional event risks.
The adjustment in the short-term FC bond ceiling stems from Moody's assessment of low transfer and convertibility risks given the country's ability and willingness to service both its public and private cross-border debt obligations. This view is supported by Thailand's healthy external liquidity position, characterized by low external debt and ample foreign exchange reserves.
-- OMAN
1) The long-term LC bond ceiling was changed to Aa3 from Aa2;
2) The long-term LC deposit ceiling was changed to Aa3 from Aa2;
3) The long-term FC bond ceiling was changed to Aa3 from Aa2;
4) The long-term FC deposit ceiling remains at A1;
5) The short-term FC bond and deposit ceilings remain unchanged at P-1.
Moody's decision to adjust the LC country ceilings for Oman is based on application of the rating agency's Local Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Oman's Sovereign Bond rating of A1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Oman's case, these consist of a 'high' assessment of Economic Strength, a 'high' assessment of Institutional Strength and a 'moderate' assessment of susceptibility to political, economic or institutional event risks.
In particular, bringing Oman's LC country ceilings closer towards the government's A1 bond rating reflects: 1) the currency peg to the US dollar which limits monetary policy flexibility; 2) the high degree of government intervention in the economy and, related to this, 3) the high dependence of government finances and overall economic performance on oil price movements.
FC ceilings were adjusted following Moody's methodological guidance to place the FC ceiling at the lower of either the LC country risk ceiling or the assessment resulting from the moratorium risk assumptions. Moody's notes, however, that Oman's foreign exchange liquidity remains strong, supported by current account surpluses and sizeable foreign exchange assets.
-- MONGOLIA
1) The long-term LC bond ceiling was changed to Ba3 from Baa1;
2) The long-term LC deposit ceiling was changed to Ba3 from Baa2;
3) The long-term FC bond ceiling was changed to Ba3 from Ba2;
4) The long-term FC deposit ceiling remains at B2;
5) The short-term FC bond and deposit ceilings remain unchanged at NP
Moody's decision to adjust the LC country ceilings for Mongolia is based on application of the rating agency's Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations methodology published earlier this year.
The adjusted local currency ceilings are consistent with the methodological framework which positions the ceiling against Mongolia's Sovereign Bond rating of B1 and Sovereign Bond Methodology factor scores, three of which are the key drivers of the ceiling. In Mongolia's case, these consist of a 'low' assessment of Economic Strength, a 'low' assessment of Institutional Strength and a 'high' assessment of susceptibility to political, economic or institutional event risks.
Moody's decision to adjust the LC country ceilings for Mongolia is also influenced by specific risks inherent in the country's operating environment: a history of boom-bust economic cycles and uncertainties affecting the predictability of the foreign investment regime.
FC ceilings were adjusted to reflect Moody's assessment of moratorium risks given the country's ability and willingness to service both its public and private cross-border debt obligations. The ceiling takes into account Mongolia's sizeable financing needs on the one hand, and its traditionally open economy with few capital controls on the other.
METHODOLOGY
Moody's country ceilings capture externalities and event risks that arise unavoidably as a consequence of locating a business in a particular country and that ultimately constrain domestic issuers' ability to service their debt obligations. As such, the ceiling encapsulates elements of the economic, financial, political, and legal risks in a country, including political instability, the risk of government intervention, the risk of systemic economic disruption, severe financial instability risks, currency redenomination, and natural disasters among other factors, that need to be incorporated into the ratings of even the strongest domestic issuers. The ceiling caps the credit rating of all issuers and transactions with material exposure to those risks -- in other words, it affects all domestic issuers and transactions other than those whose assets and revenues are predominantly sourced from or located outside of the country, or which benefit from an external credit support.
The methodology used in this action is Local-Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations published in March 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com/disclosures for disclosures on significant Moody's shareholders and on certain relationships between Moody's, its shareholders and/or rated issuers.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Thomas J Byrne
Senior Vice President
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Bart Jan Sebastian Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
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