Myanmar is in early-stage talks to get its first credit rating, people familiar with the matter said, paving the way for an eventual debut global-bond sale by a nation still recovering from decades of crippling military rule.
A rating would help ensure that foreign investors don’t see the Southeast Asian country as “a black box,” a Myanmar official said, adding that while there are no immediate plans to issue a bond, the country may do so at a later date. The country is working with Standard Chartered STAN.LN +0.29% PLC on getting the rating process started, which will involve scrutiny of Myanmar’s balance finances and revenue forecasts.
A credit rating would mark another step forward as the country slowly re-enters the global economy and welcomes overseas money managers after decades of isolation. The moves comes amid a boom year for bond sales of so-called frontier markets, as investors search the world for high-yielding assets, with countries from Pakistan to Ivory Coast returning to international debt markets. (Read more Journal coverage of frontier markets here.)
The energy-rich country with a population of about 60 million is among the poorest in the world and its initial rating likely would be well below the investment-grade status assigned to developed economies. The riskier the rating, the higher the interest rate investors will demand when Myanmar raises funds through a bond sale.
“They have to do the rating, and then they can do the bond,” said Standard Chartered PLC’s Asia Chief Executive Officer Jaspal Bindra. “They want to raise [a bond], it will be the first time,” he added.
Currently none of the three major ratings firms—Fitch Ratings Inc., Moody’s Investors Service and Standard & Poor’s Ratings Services—rates Myanmar. Representatives for the firms declined to comment or provide detail on the ratings process for Myanmar.
A nominally civilian government took over the former military state in 2011 and has been introducing gradual reforms that have led Western nations to ease some of their stiff economic sanctions. The impoverished nation has a per capita income of $876 and the International Monetary Fund estimates that the country’s economy will grow at 8.5% in the 2014 to 2015 fiscal year, up from 8.25% last year.
“It is a significant development,” Sean Turnell, an expert on Myanmar’s economy at Sydney’s Macquarie University said of the credit-rating talks. “The state of Myanmar’s public finances constitutes one of the country’s biggest development hurdles, and fixing them will require the establishment of a genuine market in its debt.”
Credit-rating discussions come just months after Myanmar’s government cut a deal with the World Bank and Asian Development Fund to start clearing hundreds of millions of dollars in debt owed to both institutions. Myanmar owes the World Bank $440 million and the Asian Development Bank another $512 million, mostly from projects dating back decades. The banks were among lenders to the country, before pulling out when Myanmar’s ruling military junta was hit with sanctions over human-rights violations.
The Japan Bank for International Cooperation, wholly owned by the Japanese government, is helping Myanmar repay these loans by providing the government short-term funds to begin clearing its arrears.
Myanmar’s eventual path to the foreign-currency bond market could mirror that of neighboring Vietnam which issued its first sovereign dollar-denominated bond in 2005, raising $750 million through a sale of 10-year notes. The socialist country followed up with another bond offer in 2010.
“Myanmar is rich in resources, which provide a strong base for its economy and a buoyant support to its credit,” said Steve Wang, head of fixed income research at Bank of China International.
Southeast Asian governments have been borrowing at a record pace this year as countries including Indonesia, the Philippines, Sri Lanka and Pakistan have tapped funds to take advantage of low borrowing costs amid global central banks’ stimulus efforts.
A total of $12.3 billion has been raised in bond issuances from the region so far this year, passing the $6.4 billion issued in 2013, according to data tracker Dealogic.
“Southeast Asian countries should benefit from the improved economic fundamentals in the region,” Mr. Wang said.
Source: THE WALL STREET JOURNAL