Moody’s Credit Rating Agency has received a backlash from the African Union-led African Peer Review Mechanism (APRM) concerning its comments on Kenya’s planned buyback of its Eurobond debt as a default.
APRM has dismissed Moody’s analysis as highly premature, speculative and damaging by the African Credit Rating Research & Advisory.
APRM said in a statement that Moody’s comments ignore the ‘voluntary’ nature of the proposed bond buyback program, which allows investors’ the right not to participate.
On August 2, 2023, Moody’s said it will treat Kenya’s bond buyback plan as a default.
According to APRM, Moody’s speculative comments on Kenya’s default event as a pre-emptive rating action is a premature release of a credit rating to the public.
APRM warns against the continued impromptu pessimistic and negative commentaries by Moody’s rating analysts, who it says are neither linked to any rating action or possess any in-depth research reports on the matter.
Besides Moody’s grim outlook, Kenya has been downgraded by Fitch and S&P Global Ratings.
Fitch Ratings revised Kenya’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the IDR at ‘B’ in mid-July.
The revision, according to the firm reflects increased external financing constraints amid high funding requirements, including a Ksh.283 billion Eurobond (US$2 billion) maturity in 2024, weakening international reserves, rising financing costs, and uncertainty regarding the fiscal trajectory, for example, due to execution risks of the announced tax hikes amid social unrest.
“Our expectation that the global tightening cycle could maintain unfavourable market conditions into 2024 is a significant headwind for the authorities who plan to refinance the Eurobond in external markets,” said Fitch in its report.