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Moody's assigns a provisional rating of (P) B1 to Mongolia's the forthcoming Medium Term Note Program

November 22, 2012 Moody's Investors Service
Moody's Investors Service has assigned a provisional rating of (P)B1 to the Government of Mongolia's forthcoming US$5,000,000,000 global medium term note program and the proposed bond issuance under the program The outlook is stable.



RATINGS RATIONALE



Mongolia's B1 government bond rating is consistent with our methodology scores of low economic and institutional strengths, moderate government financial strength and high event risk. Mongolia's rating has been constrained by susceptibility to destabilizing boom-bust cycles stemming from (1) an undiversified, dual mining/agricultural economy subject to global price volatility and supply shocks, and (2) pro-cyclical, inflationary monetary and fiscal policies. Long-term economic prospects are bright, if the country's infrastructure is developed and if macroeconomic stability is maintained.



Rating Outlook



The stable outlook is supported by the replenishment of official foreign exchange reserve holdings and improved macroeconomic stability after the successful International Monetary Fund Stand-By Arrangement in 2008-2009. Additional support is provided by the enactment into law of the Fiscal Stability Law in 2010, which holds promise for avoiding future boom-bust cycles in government finances if key provisions come into effect in 2013 and 2014 (including a limit on expenditure growth, a structural budget deficit ceiling and a 40% of GDP net-present value cap on outstanding government debt).



Credit positive factors which could change the rating -- up: Credit positive events over the rating outlook horizon include the maintenance of price and exchange rate stability and a further replenishment of net international reserves. A track record of adherence to the fiscal rule would be credit positive.



Furthermore, a timely and successful infrastructure development program, to which the Global Medium Term Note Program supports, that increases the country's export capacity and boosts government revenues would be credit positive.



Diversification and development of the country's industrial base which helps to shield the economy from mineral price volatility would also be credit positive.



Credit negative factors which could change the rating -- down: A relapse into high inflation, exchange rate volatility which leads to a deterioration in the external balance of payments would be credit negative. A weakening in the fiscal policy framework as seen in an inability to adhere to key provisions of the Fiscal Stability Law would be credit negative. Renewed uncertainty in the Mongolia's investment regime would also be credit negative.



External borrowing in excess of future repayment capacity would also be credit negative.



The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.



REGULATORY DISCLOSURES



The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.



For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.



The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.



Information sources used to prepare the rating are the following: parties involved in the ratings and public information.



Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.



Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.















Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

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 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.
Company — Mongolia
  • Full name
    Mongolia
  • Registration country
    Mongolia