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To contact the authors of this blog, please call telephones (679) 3342719, (679) 3544897 or e-mail info@gilbert.com.fj.


Thursday, April 16, 2009

Fiji Ratings Downgraded by Standard and Poors

Fiji's ratings by Standard & Poors have been downgraded with effect from 15 April 2009. The revised ratings are as follows :

  • Credit Rating (Foreign Currency), Rating B-/Negative/C;
  • Rating of the US$150 million foreign debt 6.875% maturing on 13 September 2011, B-.

The foreign credit rating was reduced from 'B/B' rated in February 2009. The Standard & Poors definitions of ratings are provided at the end of this post.

The downgrade would mean that accessing debt financing from abroad would be more expensive for the Fiji Government and Fiji based businesses. Given that banking system liquidity has been quite tight in recent months, there was an option for businesses to access debt from abroad.

Also, aside from having to pay higher interest for the higher perceived risk, Fiji based businesses would also have to contend with paying more in Fiji dollar terms after the 20% devaluation by the Reserve Bank of Fiji yesterday, 15 April 2009.

Import prices might also be expected to rise as foreign based merchants and businesses price in the higher risk of default after consideration of the latest S&P ratings and those by similar agencies.

The higher prices of imports will again be passed onto ordinary consumers and households in the form of higher prices of products and services.

For advice, pls contact our office on 3342719 or email info@gilbert.com.fj.


Standard & Poors definitions :

  • ISSUE CREDIT RATING DEFINITIONS - A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion evaluates the obligor's capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
    Rating of B - An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

  • ISSUER CREDIT RATING DEFINITIONS - A Standard & Poor's issuer credit rating is a current opinion of an obligor's overall financial capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. In addition, it does not take into account the creditworthiness of the guarantors, insurers, or other forms of credit enhancement on the obligation. The issuer credit rating is not a recommendation to purchase, sell, or hold a financial obligation issued by an obligor, as it does not comment on market price or suitability for a particular investor.
    Rating of B - An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.

  • RATING OUTLOOK DEFINITIONS - A Standard & Poor's rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.
    Positive means that a rating may be raised.
    Negative means that a rating may be lowered.
    Stable means that a rating is not likely to change.
    Developing means a rating may be raised or lowered."

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