LONDON Feb 20 Less than a week after putting
Mongolia on a downgrade warning, rating agency Moody's said the
prospect of an International Monetary Fund bailout proposed over
the weekend could help the country's credit profile recover.
Moody's said in a statement on Monday that Mongolia's plan
to exchange the debt of the country's development bank could
constitute a default in technical terms, but that the prospect
of IMF support should help the longer-term outlook.
The country is holding investor meetings this week to swap
the bonds maturing next month for a new issue
"Depending on its terms, we may assess the bond exchange to
be 'distressed' and to constitute a default by both (The
Mongolian Development Bank) DBM and, as its guarantor, the
government," Moody's said.
"If that is the case, the loss we expect investors to incur
in the exchange relative to the original promise will inform
whether Mongolia's rating should remain Caa1 or be moved lower."
However, effective implementation of fiscal consolidation
and institutional reforms under an IMF programme would help
stabilise and then ease the government's debt strains and shore
up its dwindling foreign exchange reserves.
"Tangible evidence that this was the most likely prospects
for Mongolia's credit metrics would support the sovereign's
credit quality and indicate a recovery path for the rating,"
(Reporting by Marc Jones; editing by Sujata Rao)