Moody's rates South Africa bonds Baa1

Moody's Investors Service said it assigned a Baa1 rating to the Republic of South Africa's planned global bonds due 2022, which is being issued in exchange for a roughly equivalent amount of bonds that will fall due over the next decade. Six different dollar- and euro-denominated bonds are eligible to be tendered for the exchange, one maturing as early as 2008 and another not due until 2017.

The outlook is stable.

Moody's vice president Kristin Lindow pointed out that the South African government stayed out of the international bond markets last year because of a revenue windfall and modest external financing needs. "Indeed, the government registered its first-ever budget surplus in FY2006/07, and it is likely to repeat the performance in the current fiscal year in spite of a massive infrastructure expansion," Lindow said in an agency rating.

She went on to explain that "the economy has been expanding without interruption since a midyear slowdown in 1998, and the government's currently flush financial position gives it the latitude to refrain from issuing net new debt again this year."

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