Fitch: Bond ratings based on Karnataka guarantees

Fitch Ratings said Government of Karnataka's credit profile and the ratings on its four bond issues from three government-owned entities are primarily driven by separate unconditional and irrevocable guarantees issued by the government for debt servicing throughout the life of these instruments.

The ratings also derive strength from structured payment mechanisms and trustee-monitored escrow accounts, the agency said in a new report. The issue ratings will move in tandem primarily with the government's credit quality and adherence to the structured payment mechanism, Fitch said.

The government's credit profile benefits from its improving relative financial position driven by buoyant revenue and expenditure reforms, the agency said.

Maintaining economic growth momentum similar to that of financial year that ended March 31, 2005 and continuation of reforms implemented in 2002 will be key to achieving financial targets, Fitch said.

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