S&P: Belarus Proposed U.S. Dollar Notes Assigned 'B+' Rating; Recovery Rating '4'

FRANKFURT (Standard & Poor's) Nov. 8, 2010--Standard & Poor's Ratings Services said today that it assigned its 'B+' long-term senior unsecured debt rating to the proposed U.S. dollar notes to be issued by the Republic of Belarus (foreign currency B+/Negative/B, local currency BB/Negative/B). The amount and interest rate, as well as other details of the bond are yet to be determined.

At the same time, Standard & Poor's assigned a recovery rating of '4' to the proposed bond. This is in line with our policy to provide our estimates of likely recovery of principle in the event of debt restructuring or a debt default for issuers with a speculative-grade rating. A recovery rating of '4' indicates our expectation of a 30%-50% recovery in the event of a payment default. According to our criteria, bonds with a '4' recovery rating are rated on par with the issuer credit rating. We have therefore equalized the rating on Belarus' upcoming bond with the 'B+' foreign currency sovereign credit rating.

The ratings on Belarus are constrained by our view of its weak and deteriorating external liquidity, owing to very high current-account deficits and repeated price shocks on still-subsidized energy imports from Russia. We consider that the ratings are further constrained by the economy's structural rigidities, which hamper faster improvements in external competitiveness, and by reliance on export demand from trading partners in the Commonwealth of Independent States (CIS). The ratings are underpinned by moderate government deficits that withstood the economic slowdown comparatively well, and by moderate, albeit rising levels of government debt.


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