Peru Moves Earn Moody’s Upgrade

Peru’s recent moves to improve its external debt position have earned it a foreign-currency credit upgrade from Moody’s Investors Service, from Ba3 to Ba2, just two notches away from investment grade. “External debt ratios have moved towards those observed in other Ba-rated countries, while the share of foreign-currency denominated government debt and the degree of financial dollarization in the Peruvian banking system have reported steady reductions,” said Moody’s vice president Mauro Leos. Commenting on the rating, Goldman Sachs noted that it believes “Peru may earn the investment grade credit status (by at least one of the agencies) by late 2008 or 2009.” Peru is set to offer at least $1bn equivalent in new PEN-denominated bonds this week in a deal that establishes a series of milestones for the sovereign. The 2037 is the longest dated local currency deal from Peru and the sovereign’s first to get investment grade. Proceeds are earmarked for paying down some $1.8bn in Paris Club debt. Peru is already rated at just one notch away from investment grade by both S&P and Fitch (BB+/BB+). Domestic-currency government bonds – which were unaffected by this rating action – are rated Baa3.