Feb 2009 Financial News

T&T on credit watch

Feb 04, 2009

INTERNATIONAL rating agency Standard & Poor's yesterday placed Trinidad and Tobago' foreign currency and local currency ratings on "credit watch with negative implications".

The Washington-based agency said the republic's A/A-1 foreign currency and A+/A-1 local-currency sovereign credit rating were being placed on "credit watch" following that government's decision last week to assume control of, and provide support to key subsidiaries of CL Financial Group.

Roberto Sifon-Arevalo, S&P's credit analyst said Trinidad and Tobago's rating would remain until the agency could determine the damage to the country's financial system, the potential cost of the bailout to government and implications to the medium-term prospects of the oil-rich country.

"We will resolve the credit watch status of the ratings once we can estimate the potential fiscal cost to the government, the broader damage to its financial system, and any impairment to the island's medium-term growth prospects," Sifon-Arevalo said in a statement.

The S&P analyst said: "Trinidad and Tobago enters this CL Financial Group intervention with general government assets exceeding debt by 4.5 per cent of GDP in 2008, a substantial improvement from a net debt position of 20 per cent in 2003.

"The country's external position has also strengthened, with net external liabilities of six per cent of current account receipts in 2008, down from 134 per cent in 2003.

"The government's saving of part of its gas windfall in its Heritage and Stabilisation Fund during this period accounts for its fiscal buffer and the country's improved international investment position."

At the same time, S&P highlighted the deteriorated financial situation with CL Financial because of related-party transactions, high-risk investments, and high leveraging of the group's assets and pointed to the fact that CLICO Insurance Co. Ltd. and British American Insurance Co. Ltd had "sizeable statutory fund deficits".

Trinidad and Tobago has the highest credit rating in the region and it along with Barbados, are the only investment graded countries in the Caribbean.

Sovereign ratings can affect a country's access to funding on the international market and the interest rate on those loans. (GE)


Source:
Nation News
Wednesday February 4, 2009
http://www.nationnews.com/story/52596928572298.php