Global Arab Network | Moody's rates Qatar sovereign bonds Aa2 with a stable outlook

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Moody's rates Qatar sovereign bonds Aa2 with a stable outlook

Global Arab Network - - George Haddad

Wednesday, 18 November 2009 16:41

Moody's Investors Service has assigned ratings of Aa2 to the dollar-denominated senior unsecured bonds newly issued by the government of Qatar. These ratings are in line with the government of Qatar's existing issuer ratings, which are also Aa2 with a stable outlook.

The total size of the bond issuance was US$7 billion, split into three tranches: a US$3.5 billion tranche maturing in 2015, a US$2.5 billion tranche maturing in 2020, and a US$1 billion tranche maturing in 2040.

The government has stated that the proceeds from the bonds will be used for general funding purposes. These include the provision of contingency funding to entities owned or controlled by the government, the funding of various domestic infrastructure projects, and investment in the country's hydrocarbon sector. An additional motivation is the development of a sovereign benchmark yield curve as a catalyst for Qatar's nascent corporate bond market.

Moody's says that the government of Qatar's Aa2 issuer ratings are supported by the country's very high level of prosperity; large net external creditor position; the government's strong balance sheet (notwithstanding this debt issue); and the rapid expansion of gas exports which will significantly boost government revenues over the coming years.

Credit concerns for Qatar include a multi-year trend of soaring government expenditure which, if unchecked, could erode fiscal flexibility; a volatile regional geopolitical environment; weaker institutions than higher-rated countries; a relatively undiversified economy; and, in Moody's opinion, the government's substantial domestic contingent liabilities.

Moody's last rating action on Qatar was implemented on 24 July 2007, when the rating agency upgraded the government's issuer ratings to Aa2 from Aa3 to reflect the significant strengthening of the public and external finances.

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