04 August 2023 In line with the African Union Assembly of Heads of State and Government Decision [Assembly/AU/Dec.631(XXVII)] and Article 6(g) of the African Peer Review Mechanism (APRM) Statute (2020) which mandates the APRM to support African countries on credit ratings, the APRM undertakes routine analyses of rating actions and commentaries assigned by international credit ratings agencies on African countries.
The APRM notes with concern the comments made by Moody's Investors Service on 02 August 2023 in which the rating agency states that it will treat Kenya’s planned buyback of a portion of its Eurobond debt as a default. Moody’s comments, which were made prematurely before the official details and the terms of the buyback are made public, mischaracterizes Kenya’s prospective Eurobond buyback as a “distressed exchange which will result in economic losses to creditors”. The APRM views the comment as highly speculative, damaging and ignores the ‘voluntary’ nature of the proposed bond buyback program, which allows investors the right not to participate. Moody’s comment has triggered a selloff in Kenya's Eurobonds, spike yield, and an associated decline in the domestic currency which undermines the government’s fiscal efforts, diminishing investors’ appetite and confidence, thereby compromising the success of the buyback program.
The APRM further views Moody’s speculative comments on Kenya’s default event as, in- effect, a preemptive rating action and equates it to a ‘premature release of a credit rating to the public’.
In view of these continuing impromptu pessimistic and negative commentaries by rating analysts that are neither linked to any rating action nor in-depth research report, the APRM calls on African Network of National Regulators of Rating Agencies to institute appropriate regulatory measures that ensure proper conduct of credit rating business.
APRM CREDIT RATING RESEARCH & ADVISORY
For inquiries please contact:
Dr McBride Nkhalamba - Ag. Director of Governance & Specialised Reporting
Dr Misheck Mutize - Lead Expert on Credit Rating Agencies - Misheck.Mutize@aprm-au.org
Ms Ejigayhu Tefera - Economic Researcher - Ejigayhu.Tefera@aprm-au.org
