Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's downgrades Azerbaijan's rating to Ba2, with a stable outlook, concluding review for downgrade

18 Aug 2017

New York, August 18, 2017 -- Moody's Investors Service (Moody's) has downgraded the government of Azerbaijan's issuer and senior unsecured debt ratings to Ba2 from Ba1 and changed the rating outlook to stable, concluding the rating agency's review for downgrade initiated on May 19, 2017. Moody's also downgraded to Ba2 from Ba1 the senior unsecured debt rating of Southern Gas Corridor CJSC (SGC), whose bonds are backed by the government's guarantee, and changed the rating outlook to stable.

The rating downgrade reflects the significant and long-lasting weakening of Azerbaijan's fiscal and economic strength, which is driven by the ongoing impact of lower oil prices, the country's declining oil production potential and its very weak banking system. Together these factors will continue to constrain growth and pose material contingent liability risks to the sovereign.

The stable outlook reflects Moody's expectation that the growth of additional direct debt and contingent obligations, including government guarantees stemming from financial support to Azerbaijan's banking sector restructuring and its large hydrocarbon sector projects, will level off by 2020. The stable outlook also assumes that, over time, the government will manage fiscal policy and its own balance sheet and the assets of its sovereign wealth fund in a way that will improve flexibility and capacity to effectively buffer the impact of lower-for-longer oil prices and ongoing declines in oil production.

Azerbaijan's local currency debt and deposit ceilings are lowered to Ba2 from Ba1. The foreign currency bond ceiling is also lowered to Ba2 from Ba1. The foreign currency deposit ceiling is lowered to Ba3 from Ba2.

RATINGS RATIONALE

RATIONALE FOR THE RATING DOWNGRADE TO Ba2

The downgrade of Azerbaijan's government debt rating to Ba2 reflects a steep rise in government indebtedness, both direct and indirect in the form of guarantees, beyond the rating agency's expectations when the rating was lowered to Ba1. Moody's does not expect the deterioration to reverse.

The increase in gross government debt was initially a consequence of the large depreciation of the exchange rate in 2015-16 but has been exacerbated by the additional costs of supporting state-owned entities (SOEs), primarily the country's biggest, state-owned bank, the International Bank of Azerbaijan (IBA). Following the restructuring of IBA, the government will assume about $2.45 billion in external debt from the bank. Prior to this transaction, that support entailed the issuance of government guarantees in support of Aqrarkredit (the vehicle into which IBA's non-performing loans have been transferred). The bulk of these guarantees are in the form of very long-term (30-year with a 5-year grace period) manat-denominated promissory notes carrying a 0.15% rate of interest. The remaining guarantees, which were meant to back the bank's external liabilities, will be cancelled following the transfer of most of those obligations to direct debt of the sovereign.

Moody's consolidates the explicit guarantees issued by the government in support of Aqrarkredit and to a number of other SOEs into its overall assessment of government indebtedness. This interpretation reflects the rating agency's view that, for example, the likelihood of guarantees in support of Aqrarkredit being triggered is high, given the poor quality of the assets transferred at face value from IBA. It also reflects the close operational relationship between the government and the SOEs, as illustrated by the periodic transfer of funds by SOFAZ and the government to pay the debt service of SOEs. Overall, explicit guarantees amounted to about 60% of the government's gross debt at the end of 2016. That proportion will diminish slightly to around 55% at the end of 2017.

On that basis, gross government debt in Azerbaijan is relatively high for a developing country that is highly dependent on a single volatile source of foreign currency income -- hydrocarbons -- that will continue to shrink in the years ahead. Gross government debt accounted for roughly 51% of GDP at the end of 2016 and Moody's expects that number to rise to about 52% of GDP by the end of this year and to more than 55% of GDP by the end of next year.

Accordingly, Moody's expects that gross debt (including explicit guarantees) will continue to climb towards 60% of GDP through 2020 before tapering off. Moreover, both SGC and its owners, the government and the 100%-state-owned State Oil Company of the Azerbaijan Republic (SOCAR), have additional financial commitments for various development projects both domestically and abroad, some of which are not explicitly guaranteed by the government.

With the large rise in gross government debt, Azerbaijan's fiscal strength has continued to weaken beyond previous Moody's forecasts. That said, the even-larger financial assets of the State Oil Fund of Azerbaijan (SOFAZ), which were equivalent to about 88% of GDP at the end of 2016, contain the deterioration in fiscal strength and maintain the government's position as a net creditor. Assuming a relatively stable manat exchange rate against the US dollar and little change in the dollar value of SOFAZ assets, Moody's expects the government's net creditor position (defined as the difference between SOFAZ assets and the government's direct plus guaranteed debt) will contract by roughly one-third as a share of GDP by the end of 2018 from 42% of GDP at the end of 2016.

Meanwhile, the financial demands on SOFAZ have increased significantly and highlight the blurred line between the state budget, SOFAZ and state-owned entities.SOFAZ is the backstop for the public sector and funds most of the state budget's non-oil deficit, which came in at 27% of non-oil GDP in the first half of 2017. SOFAZ has also provided foreign-currency liquidity to the central bank used to pay principal and interest on SGC's and SOCAR's external debt, likely in order to preserve the central bank's foreign currency reserves that have fallen to about $5 billion from a peak of $15.2 billion during 2014. A transfer from SOFAZ to the central bank of up to AZN 7.5 billion (around $4.4 billion at current exchange rates) was approved for 2017, of which AZN1.4 billion was transferred thus far. Moody's expects that, going forward, in the quite likely event that oil and gas revenues are insufficient for SGC and SOCAR to finance their own debt service in full, additional transfers will be made.

Economic strength has been undermined by the deterioration in fiscal strength and pro-cyclical fiscal policy

The erosion of fiscal strength limits the scope for accommodative fiscal policy, which weighs on economic strength. We expect real GDP to decline by around 1.5% this year after a contraction of nearly 4% in 2016. The recovery from 2018 onwards is expected to be gradual, since Azerbaijan's economic dependence on a natural resource sector that is in long-term decline continues to pose severe economic challenges. Oil production has fallen by almost a quarter in the last 6 years, and international organizations such as the International Energy Agency expect it to fall further. Revenue from new gas export pipelines, one of which is scheduled to start operating in June 2018, will offset only part of the decline in crude oil exports.

In Moody's view, Azerbaijan's economic weakness is exacerbated by the limited scope for counter-cyclical fiscal policy, compounding the challenges posed by a fragile banking system and highly dollarized economy. This limited policy maneuver was demonstrated by the government's decision to reduce SOFAZ transfers to the 2016 state budget and then not to go forward with the originally planned fiscal stimulus, instead cutting government capital expenditure to reduce pressure on the exchange rate. The fiscal stance will remain tight in 2017, further contributing to the economy's ongoing contraction, and fiscal policy is likely to remain pro-cyclical over the coming years.

RATIONALE FOR THE STABLE OUTLOOK

STABLE RATING OUTLOOK REFLECTS EXPECTATIONS FOR STABILIZATION OF GROSS DEBT RATIOS

The stable rating outlook reflects broadly balanced risks to the sovereign credit profile over the medium term. Most importantly, and despite the steep rise in gross government debt, Azerbaijan is expected to remain a net creditor, which provides significant support to the Ba2 rating.

Moody's expects that the growth of government debt and contingent obligations including government guarantees will taper off by 2020, partly as a result of the implementation of a set of fiscal rules intended to shrink the government's non-oil budget deficit from 2018 onward.

Upside risks would involve higher than expected oil and gas revenues that would lower the dependence of SOCAR and SGC on SOFAZ support for debt service. Downside risks derive from potentially large government-funded investment in the oil sector in order to ameliorate the persistent decline in oil production capacity, which could further increase government debt and erode fiscal strength.

WHAT COULD CHANGE THE RATING - UP

Upward pressure on the rating would derive from decisive action to address the principal challenges in the country's credit profile, namely the erosion in fiscal strength, the lack of economic and export diversity and the weak banking sector. A sustained stabilization in the government's direct and indirect debt burden, most likely reflecting economic recovery and a healthier banking system, would be credit positive. However, any stabilization would be unreliable if founded solely on rising oil prices, as distinct from a gradual diversification of the economy to address the high dependence on oil, and a more strongly capitalized, liquid banking system.

WHAT COULD CHANGE THE RATING - DOWN

The ratings would come under negative pressure if the government's balance sheet deterioration were to continue beyond 2018, particularly were that to be associated with further banking sector shocks and increased budgetary reliance on SOFAZ assets that further eroded the country's net creditor position. Also negative would be an escalation of the geopolitical conflict in Nagorno Karabakh or increased uncertainly within the domestic political environment, such as related to presidential succession.

GDP per capita (PPP basis, US$): 17,439 (2016 Actual) (also known as Per Capita Income)

Real GDP growth (% change): -3.8% (2016 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 15.6% (2016 Actual)

Gen. Gov. Financial Balance/GDP: -1.2% (2016 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -3.6% (2016 Actual) (also known as External Balance)

External debt/GDP: 37.3% (2016 Actual)

Level of economic development: Low level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 14 August 2017, a rating committee was called to discuss the rating of Azerbaijan, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The issuer has become less susceptible to event risks.

The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Kristin Lindow
Senior Vice President
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Atsi Sheth
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.