#header-inner img {margin: 0 auto !important; #header-inner {text-align: Center ;} Fiji Coupfourpointfive: Leading rating agency gives regime's junk bond a B

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Friday, March 11, 2011

Leading rating agency gives regime's junk bond a B

By Paul McBeth

March 11 (BusinessDesk) – Fiji’s military regime has turned to the junk bond market to refinancing existing debt and gain working capital this year.

The South Pacific military dictatorship, ruled by Voreque Bainimarama since a 2006 coup, sold US$250 million of five-year unsecured bonds to refinance US$150 million of notes maturing in September. The balance is expected to fund capital works.

The bonds were sold at 9%, with a third of the bonds going to Asian investors and the remainder to American and European accounts, according to reports.

Rating agency Standard & Poor’s gave the issue a sub-investment grade ‘B-’ rating. That matches Fiji’s foreign currency rating, reflecting the agency’s view that the lack of hard data and the country’s persistent fiscal and current account deficits leave it vulnerable to default.

Still, S&P have Fiji on a positive outlook, contingent on improving the government’s books and attracting foreign aid.

New Zealand’s relationship with Fiji soured after the coup, hitting rock bottom at the end of 2008 as the Pacific nation expelled Australian and New Zealand diplomats. Since then, Foreign Minister Murray McCully has been working to improve relations since and he hopes to informally meet Bainimarama this month.

Parliament’s Foreign Affairs and Trade Committee supported the government’s diplomatic approach to Fiji, in a report on New Zealand’s relations with South Pacific nations, saying Fiji’s survival is in the interests of the region. It shied away from offering any specific strategies on the relationship, other than supporting the return to constitutional government.

“While we support the absence of restrictions on tourism, trade, or investment, we note that the private-sector investment needed for the country’s long-term development is unlikely to occur in the current environment,” the report said. “We also note that those who leave Fiji represent the skill loss the country can ill afford.” (BusinessDesk) (scoop.co.nz)



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.


http://www.standardandpoors.com.au.

24 comments:

mark manning said...

Basically, Fiji's economy is up shit creek without a paddle ?

ex Fiji tourist said...

Mark,

You forgot to add that the canoe is full of holes and the creek is teaming with sharks.

Anonymous said...

So is Greece, ireland, portugal, etc. with the same rating. Despite the rating, to get so many investors willing to lend to fiji means that they saw some positive in the future of fiji.

You ask anyone familiar with international financial market and they will tell u Fiji got a very good deal.

Anonymous said...

This rating is all speculation as this is how the bond markets, currency and commodities markets work in the REAL WORLD today.

This is why you see peaks and troughs in all these markets on a daily basis as things are evolving every second , every minute of the day - Case in point is the 8.9 Japan Eartquake having on world markets today. Yesterday it was Libya uprising, before that was Egypt & Tunisia situation.

Economists like Warden Narsey & others at USP & University of Fiji are all theoratical economists - Asseing things from a theoratical perspective(book) without actually working an honest days work (practically involved) to see how the REAL WORLD operates -They are basing their assessment on a given point and time based on what textbooks tell them without facturing in future scenarios.

I attended USP as was taught Economics by Warden Narsey, Biman Prasad, Mahendra Reddy and others at USP and what they teach you is nothing compared to how the real world operates as it is all based on theoratical bullshit.

Anonymous said...

if people of Fiji really cares for next generation , it is now the time to stand up and forced this regime out , or a time will come people may starve , back to coconut and banana leaves.

mark manning said...

Call the Beacon Lighter Mim ! Call the Beacon Lighter !
Why should I call him Mim ?
I mean, Mim, call the Beacon Lighter !
http://www.youtube.com/watch?v=Gc87C8VsUAk

ex Fiji tourist said...

to the green goon at 9:21

You also get a 'good deal' if you go to a pawnbroker.

You feel great when you walk out with a fist full of dollars but the pain sets in when you try to repay the loan to get your possessions back.

Anonymous said...

Payment of interest at 9% is regrettably not theoretical bullshit.Default will not be theoretical bullshit.And repayment of or rollover of the ever increasing foreign debt will not be bullshit.Similarly looking down the barrel of a rifle wielded by an RFMF goon is not bullshit.These are all real world events in a day in the life of Fiji.Finally heavily discounted holidays to keep tourist numbers up is not bullshit,just a little spit and polish for the jackboots :)

Anonymous said...

Well said @Anonymous 1:10

Debt is debt and at the end of the day someone has to pay.

Unfortunately the villagers will have to pay via increased busfare, tin fish, bread and butter,childrens textbooks and fuel for their boats and cars etc.etc etc.

That's Class 1 Economics for all you sotia ni solisona.

Welcome to the real world.

Econ 101 said...

Agreed debt is debt and with looming recessions in years to come, there's no doubt Fiji will be vulnerable. The Anon student at 6.40am sounds like the same Anon at 1.10pm economically working overtime to discredit Prof Narsey. Highly possible he didn't graduate and got nowhere in the world of economics?

Anonymous said...

Key sentences being.

"junk bond'.

"unsecured bonds'.

"improving doner relations'.

And this crucial one.

"debt default".

My advice to any future democratically goverment would be too ask these people what they were thinking lending these people (regime)this sort of money? (blood). Would then advise invoking
"debt default" - and if they didn't like it we would see them in court (ours - Viti).

Anonymous said...

Anonymous at 1.10 pm, why the indigenous expletive? The current Cabinet is lean and hungry, the civil service has been downsized, investments in infrastructure are in our face, mineral exports will increase, tourism is on a roll, developments in agriculture are positive, mahogany is slow but sure, reforms pushed by Filipe Bole are right on, microfinance is spreading so is financial literacy, and villagers are backing this government. The negatives are mainly in the minds of pessimists and cynics. What a pity that is not the Pacific way.

Anonymous said...

Those in charge seem to forget how well we were doing 25-30 year ago. We have slipped and slipped and slipped. Just look at the poverty and unemployment levels. This IG Government has only made this far worse.

mark manning said...

@ anon 456
I agree, no right minded person could possibly expect a return having lent money to an illegal entity in the 1st place !

I doubt a Legitimate Government would be accountable for these debts taken on by the Regime.

Stiff cheddar to the people who were greedy and foolish enough to lend it !

What is the Legal advice on this, does anyone know ?

Wasn't it this same sort of stupidity that caused the Global Financial Crisis in 2007 to 2009 ?

A crisis the World is still trying to recover from !

Can someone lend me $100,000,000, I don't have anyway of repaying it though !

Anonymous said...

Imagine what the situation would be like if the overblown SDL cabinet was now in charge, and the overblown civil service with their overpaid CEOs. Such a lot of dead wood in the system paid by taxpayers and the sweat of sugar cane farmers. With the current global economic trends and global disasters we're sure lucky to have a regime to force self -discipline down the throats of the i taukei in particular. Why are some of them - supporters of the previous government especially still wasting time by the yaqona bowl spreading doom and gloom typhoid and other water borne diseases. Wake up people. A new dawn is breaking.

Anonymous said...

Sorry Mataivalu ni solisona do not know what debt is all about - The only thing they understand is that Voreqe has increased thier pay & rations.

The dumb shits do not know that in real terms that the value of what their dollar is now buying has decreaed with increased perices for everything.

Like they say Ulukau ga na Ulukau - God help Fiji.

Anonymous said...

Can S&P's be expected to be anything but ultra ultra conservative ? They hedge their bets don't they ? B is better than B- or C

Anonymous said...

Since the loan is for five years we might as well have elections the year after the loan repayment - 2017.

sega na leqa qara na leqa. said...

Sorry Election ison 2014 bcos lots of us is crying for a ELECTION to chhange this I/Regime.

Be ready on that particular day to choose the government you want and they will be the chosen govt to clear the loan debt.

All of us in Fiji today has seen how good is this I/Regime did to all of us in the money that they loaned for developments around the Fiji Isalands.

SA DRI YANI QAI LEWA...........

Anonymous said...

Forget the general election 2014. IT WILL NEVER COME unless a deal brokered fairly well that the next government will not change anything laid down by the regime. If they do change it then FB and AK will takeover again.

Anonymous said...

SDL took the USD in 2006. It was not wrong to borrow then and neither now.

If we had funded the payment by borrowing domestically, it would have tried bank liquidity forcing interest rate off the roof.

For those who say, debt is bad, it must be said, yes if it is beyond your means. The international benchmark is debt as a ratio to GDP. In this regard, fiji's ratio is below 60%. This is far better than most countries, including ireland, spain, italy, portugal.

We all borrow to buy our home or car. With debt, we would never own our property.

Anonymous said...

Bainimarama is likely to be the next President to monitor and control the next elected government. We make our plans but God has his. Japan's megaquake is an example.

Anonymous said...

FIJI SHOULD HAVE AG/BANI RUNNING THE GOVT UNTIL THEY PAY ALL THOSE DEBT THEY LOANED.
WHICH NEW GOVT WANTS TO TAKE OVER THIS IDOTS DEBT ON IT GOVT FUTURE.

Debtor said...

Oi what dont these finance loan sharks not understand? The probability of recovery from default is not 30-50%, it is 0%. Saiva, zero, nyet, nahi, sweet fuck all, dravusakulukulu ...what else Ratu Qereti? We the people never authorized these thieves and goons to borrow any money. If they do, it is for their own benefit. We the people of Fiji will never pay back a cent of this so-called loan. If these peddlers of junk bonds want to get repaid, they have to take the goons and their families and squeeze them until their shit comes out. BUT FIJI WILL NEVER PAY FOR THIS GRAND THEFT. YOU HAVE BEEN WARNED SO DON'T COME BACK COMPLAINING!