New York, 12-16-97 -- Moody's Investors Service has assigned country ceilings of Aaa for ratings on long-term foreign currency bonds and notes, Aaa for ratings of foreign currency-denominated long term bank deposits and Prime-1 for short-term obligations of issuers domiciled in the Channel Islands (Alsderney, Guernsey, Jersey and Sark) Gibraltar, the Isle of Man and Monaco. Moody's also announced the country ceiling of Aa3 for ratings on long-term foreign currency bonds and notes, Aa3 for ratings of foreign currency-denominated long term bank deposits and Prime-1 for short-term obligations of issuers domiciled in San Marino. In addition, Moody's assigned the country ceiling of Aa2 for ratings on long-term foreign currency bonds and notes, Aa2 for ratings of foreign currency-denominated long term bank deposits and Prime-1 for short-term obligations of issuers domiciled in Andorra. At this time, Moody's does not rate any debt issued by the governments of these jurisdictions. In the future, such debt may be rated at or below their respective country ceilings. MOODY'S ASSIGNS FOREIGN CURRENCY COUNTRY CEILINGS TO ANDORRA, CHANNEL ISLANDS, GIBRALTAR, ISLE OF MAN, MONACO, AND SAN MARINO
The ratings for the above islands and territories correspond to those of sovereigns with whom they have long-standing economic, political and monetary linkages, i.e., the United Kingdom in the case of the Channel Islands, Gibraltar and the Isle of Man; France in the case of Monaco; Italy in the case of San Marino and Spain in the case of Andorra.
Even though each of these small jurisdictions has its own legal and administrative system, UK, France Italy and Spain, respectively, exercise considerable influence over their monetary systems. The strong and stable links between the small jurisdictions and their respective country of affiliation eliminates the potential for differing levels of transfer risk.
The co-principality of Andorra is subject to the largely symbolic rule of the "co-princes" -- the President of France and Spain's Bishop of Urgel. In 1993 the Andorran government signed a treaty of cooperation with France and Spain which explicitly recognizes the sovereignty of Andorra. However, Andorra does not issue its own currency, the French Franc and the Spanish peseta are the official units of currency. The Aa2 country ceiling for Andorra is associated with that of Spain due to the long-standing historical, economic, political and cultural ties between the two. For instance, the budget is presented in pesetas and Spain is the destination of about 60% of exports.
The Channel Islands:
Moody's Aaa ceiling for the Channel Islands pertains to Alsderney, Jersey, Guernsey and Sark. The rating reflect the islands' status as a dependent territory of the British Crown. The ceiling is associated with that of the United Kingdom since the British pound is the official currency. For cash transactions in the local economy Jersey and Guernsey each issue their own currency, which circulates concurrently with the British pound. The economic and political links with the Crown have a long history, and Moody's believes that they will continue to be stable.
The Aaa ceiling for Gibraltar reflects its status as a dependent territory of United Kingdom. The economic and legal links with the UK were ratified by the people of Gibraltar by a referendum in 1967. Moody's believes that these links will remain stable. The British pound is legal tender in Gibraltar. Gibraltar issues the Gibraltar pound, whose value is at parity with the Pound Sterling. However, the Gibraltar pound is only for domestic circulation and the British pound remains the official currency which is used for accounting purposes.
The Isle of Man:
The Isle of Man is part of the British Isles and the Aaa rating reflects its status as a dependent territory of the British Crown. The British pound is the official currency. The Manx also mint their own currency which circulates concurrently with the sterling. The nature of economic and political ties between the UK and the Isle of Man is unlikely to change in the near future.
The Aaa rating reflects Monaco's status as an Independent Principality of France and recognizes that France has ultimate authority on Monaco's monetary and exchange rate policy. The French franc is the official currency although Monegasque coins also circulate. In accordance with the Franco-Monegasque agreement, the customs and exchange rules and regulations in Monaco are the same as those as in France. The legal and economic links with France are well-entrenched and are likely to remain stable.
The Aa3 rating reflects San Marino's unique status as an independent Italian state with long-standing monetary linkages with Italy, which determine its exchange control regime. The official unit of currency is the Italian Lira. San Marino receives an annual subsidy of approximately 9 billion lire in exchange for accepting Italian rules concerning exchange controls and the renunciation of customs duties. The nature of the legal and economic links between Italy and San Marino is unlikely to change.
Moody's will publish an in-depth Special Comment early next year on the above jurisdictions and the rating rationale.
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