Senegal's bonds drop after Moody's warns of liquidity risks
By Duncan Miriri
NAIROBI, Oct 13 (Reuters) - Senegal's international bonds fell on Monday after Moody's cut its credit rating, warning that it was now less certain that the West African nation would be able to avoid restructuring its debt.
Senegal is trying to resolve a misreporting case with the International Monetary Fund to secure a new support programme, after revealing last year it had more than 11 billion dollars of previously undisclosed debt.
The IMF froze Senegal's three-year, $1.8-billion credit facility after the hidden debt was uncovered. The subsequent processes of ascertaining its true debt have left its debt-to-GDP ratio at almost 120%.
Moody's lowered Senegal's rating to Caa1 from B3 on Friday and kept its negative outlook.
While Moody's "baseline scenario" assumed the IMF would eventually provide support without demanding a debt restructuring, its confidence in that outcome had "diminished", the ratings agency said.
Monday's market falls saw the euro-denominated 2028 XS1790105180=TE and 2037 bonds XS2333676307=TE lose over 1 euro cent, extending a nearly week-long run of selling that left them at just above 85 cents and 64 cents on the euro respectively.
The government criticised the downgrade, citing its ability to raise funds domestically and to meet its current budget targets.
"It does not reflect the actual economic fundamentals of the country nor the public policy measures implemented to consolidate fiscal stability and strengthen debt sustainability," the finance ministry said.
Moody's cut means Senegal's rating is now one notch below S&P Global's B- score, which also carries a 'negative outlook' - rating agency terminology for a downgrade warning.
The government said on Sunday it had raised more than 450 billion CFA francs ($798.93 million) in a bond issue on the regional market that closed this month, with strong demand from Senegalese citizens abroad.
This month's issue is the third this year in a series targeting domestic and regional investors.
($1 = 563.2500 CFA francs)
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