Fiji US$250 Million Bond Assigned ‘B-’ Rating; Recovery Rating ‘4’
Melbourne, March 11, 2011—Standard & Poor’s Ratings Services said today that it has assigned its 'B-' long-term senior unsecured debt rating to the US$250 million five-year bond issued by the Republic of Fiji (foreign currency B-/Positive/C, local currency B/Stable/C). This bond issue replaces the US$150 million notes that are due to mature on Sept. 13, 2011, and are expected to fund capital works.
At the same time, Standard & Poor's assigned a recovery rating of '4' to the bond. This is in line with our policy to provide our estimates of likely recovery of principle in the event of debt restructuring or a debt default for issuers with a speculative-grade rating. A recovery rating of '4' indicates our expectation of a 30%-50% recovery in the event of a payment default. According to our criteria, bonds with a '4' recovery rating are rated on par with the issuer credit rating. We have therefore equalized the rating on Fiji’s bond with the ‘B-’ foreign currency sovereign credit rating.
The issuer credit ratings on Fiji reflect our opinion of the country’s persistent fiscal and current account deficits, as well as deficiencies in available data--a factor that complicates our analysis. These factors are offset, in part, by Fiji’s improved external indicators. The delay in the return to democratic rule in Fiji has already been reflected in the ratings, and our forecasts assume a status quo. However, we believe that diminished institutional transparency and independence, as well as decrees that weigh on civilian and media freedoms, weaken the prospects for investment and for donor re-engagement and thus the nation’s growth prospects.
The positive outlook on Fiji’s foreign currency rating reflects our view of the improvement in Fiji’s external position, including in the level of foreign exchange reserves. An upgrade of the foreign currency rating could follow improvements in one of several areas, including strengthening Fiji’s political institutions, improving donor relations, enhancing growth prospects through labor or market reforms, bettering the external indicators, or placing the government’s debt trajectory on a steady downward slope. On the other hand, Fiji’s ratings could stabilize at current levels if none of these developments materializes or if external or domestic shocks sharply reduce Fiji’s international reserves from current reported levels.
About Standard & Poor’s
Standard & Poor’s, a part of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of credit ratings. With offices in 23 countries, Standard & Poor’s is an important part of the world’s financial infrastructure and has played a leading role for 150 years in providing investors with information and independent benchmarks for their investment and financial decisions. For more information, visit
Sharon Beach, Melbourne, (61) 3 9631 2152, firstname.lastname@example.org
Primary Credit Analyst:
Kyran Curry, Sovereign Credit Ratings, email@example.com
Ratings may not be compiled into a database or systematically distributed or shared for commercial purposes in a manner that substitutes for a paid Standard & Poor’s service.
Standard & Poor’s (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor’s credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).