LONDON, Feb 15 (Reuters) - Ratings agency Moody’s has placed Mongolia on review for a downgrade, citing concerns about the financing of an upcoming $580 million bond repayment.
The Development Bank of Mongolia’s (DBM) bond falls due on March 21, and lacks the funds to finance the repayment itself. Moody’s said the presence of an unconditional government guarantee on the DBM issuance meant it would consider a default on the notes to constitute a default by the sovereign.
The government has been in talks with China and the International Monetary Fund (IMF) for assistance, but investors are worried that any bailouts might not be negotiated in time.
“The as yet unresolved issue of how that maturity will be financed poses a near-term threat to Mongolia’s credit profile, notwithstanding ongoing discussions with the IMF,” Moody’s said in a statement.
On Wednesday the bonds were showing a bid of 97 cents in the dollar, with a yield as high as 34 percent.
Reporting by Claire Milhench; Editing by Gareth Jones