Oman will not require Bahrain-like bailout, Moody’s

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The rating agency said that the Sultanate has enough foreign-exchange reserves and another estimated $15 billion in liquid sovereign-wealth-fund assets.

Wednesday 13, March 2019

(Bloomberg) --Moody’s Investors Service, which downgraded Oman’s credit rating to junk last week, said the cash-strapped Sultanate will not require a bailout similar to the one that Bahrain got in the next 12 to 18 months.

Alexander Perjessy, a senior analyst at Moody’s, said that Oman doesn’t have any significant debt redemption coming due and has sufficient buffers to get through an unlikely period of impaired market access in the next 12 to 18 months.

“The initial conditions are very different, Oman is starting from a much stronger position than where Bahrain was a year ago, and that is reflected in the ratings,” added Perjessy.

Bahrain briefly lost access to international capital markets last year when its external cushion was very low and it also needed to redeem a $750 million Islamic bond last November

The yield on Oman’s bond due in 2028 remains higher than Bahrain’s similar-maturity debt, which rallied last year after the nation won a $10 billion bailout package and inclusion in JPMorgan Chase’s emerging-market bond indexes.

Oman now has a sub-investment grade at all three major rating companies after Moody’s lowered its rating to Ba1, with a negative outlook. The rating company typically seeks to review any non-stable outlook within 12 to 18 months.

Perjessy said that Oman’s negative outlook reflects the risk that when fiscal metrics continue to deteriorate in the next couple of years, there is a possibility that the market’s willingness to finance Oman would weaken.

The Gulf Arab monarchy plans to slash its borrowing for 2019 by as much as 70 per cent and rely on asset sales to plug its budget deficit. Investors said it will first need to convince the market it’s pushing through reforms to tame its budget deficit before selling Eurobonds.

TAGS : junk, downgraded , Moody’s, Bahrain, Eurobonds

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