Moody's lowers Laos, view to negative

Moody's Investors Service said it downgraded the government of Laos' issuer rating to Caa2 from B3 and changed the outlook to negative. Concurrently, Moody's lowered Laos' long-term foreign-currency bond ceiling to Caa1 from B1 and its long-term local-currency bond ceilings to B1 from Ba3.

The downgrade and outlook revision conclude the review for downgrade started on June 19, the agency said.

“The decision to downgrade the rating to Caa2 reflects Moody's assessment that Laos is facing severe liquidity stress, given sizeable debt servicing payments due this year and persisting until 2025, and constrained financing options. Heightened liquidity risk is exacerbated by weak external and fiscal buffers and poor governance, and points to a material probability of default in the near term,” the agency said in a press release.

The outlook reflects the risk of material losses to investors in a default, beyond what would be consistent with a Caa2 rating, Moody’s said.

“A more severe deterioration in credit fundamentals than Moody's currently expects, potentially because of a more acute impact of the coronavirus shock, would raise the probability of default and may imply larger losses to private-sector creditors,” Moody’s said.

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