Georgia acts to cool investor fears as bombs fall

By Simon Shuster and Chris Baldwin

MOSCOW, Aug 9 (Reuters) - Georgia, whose credit ratings were cut on Friday after military clashes with Russia, was praised on Saturday by foreign investors, who contrasted its efforts to reassure them over the crisis with those of Russia.

Western bankers said that since fighting began in the breakway province of South Ossetia on Thursday, they had received phone calls and emails from Georgian leaders including Prime Minister Lado Gurgenidze.

They said Russia had made no similar effort, despite a plunge in its stock market on Friday which took the index of its most liquid exchange close to 21-month lows. The rouble also fell on foreign exchange markets.

Gurgenidze even held a private conference call with two major western banks at 1645 Moscow time (1245 GMT) on Friday, as towns in South Ossetia were under heavy fire from Georgian artillery.

"His main message was that the stock market is safe and there will be no bond defaults ... He's really great with investors, really great at reassuring us," said one banker who participated, asking not to be named as the call was not meant for public consumption.

The call, first reported on the website of U.S. political journal The Nation, focused on risks surrounding Georgia's only Eurobond, sold in April. The $500 million five-year bond was three times oversubscribed at launch as investors diversified away from the slowing developed world economy.

Participants in the conference call then received several emails from Gurgenidze's office.

"The Prime Minister has held throughout the day calls with investors and rating agencies and remains in touch with the investor community," said one email obtained by Reuters. Its subject line was: "No unusual economic activities or interruptions in Georgia today."