Bangkok--7 Sep--Moody's Investors
Moody's Investors Service has realigned Korea's local currency bond ceiling to Aa1 from Aaa as part of an initiative to make more comparable and consistent its sovereign ceilings and ratings, and to reflect better country risk concepts.
At the same time, the Republic of Korea's A2 foreign and local currency government ratings, Aa3 foreign currency bond ceiling, A2 foreign currency bank deposit ceiling, and Aa1 local currency bank deposit ceiling are unaffected by this action. The rating outlook is stable.
"The local currency country ceiling for bonds summarizes general country-level risks (excluding foreign-currency transfer risk) that should be taken into account in assigning local currency ratings to locally domiciled obligors, or locally originated structured finance transactions," says Thomas Byrne, a Moody's Senior Vice President. "They indicate the rating level that will generally be assigned to the financially strongest obligations in the country, with the proviso that obligations benefiting from support mechanisms based outside the country (or area) may on occasion be rated higher. " The rating agency emphasizes that local currency country ceilings do not often change.
Moody's is also rethinking its local currency bond ceilings globally in a way that may place more weight on certain country risk factors which are already incorporated into Moody's sovereign rating architecture, namely the local currency deposit ceiling, foreign currency bond ceiling, and the government's bond ratings.
Ceilings should reflect plausible factors or events which would be extremely disruptive to the commercial and institutional environment in a particular country. Such factors include institutional weaknesses with a particular country, or event risks having low probability but high severity.
While Moody's will refine its global approach by October, in the case of Korea, Moody's has decided that the risks presented by the potential for armed conflict or geopolitical disturbances with North Korea should be incorporated into the local currency bond ceiling, as it is incorporated for other countries, such as for Israel and various highly rated Middle Eastern countries, which have Aa1 and Aa2 ceilings, respectively.
The last rating action on South Korea was taken on 25 July 2007, when Moody's raised the government long-term foreign-currency and local-currency ratings to A2 from A3, the country ceiling for foreign-currency bonds to Aa3 from A1, the country ceiling for foreign-currency bank deposits to A2 from A3, and the short-term ceiling for foreign currency bank deposits to P-1 from P-2.
The principal methodology used in rating the government of the Republic of Korea is Moody's Sovereign Bond Methodology, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory on Moody's website.
Press releases concerning affected rated issues will follow.
London
Pierre Cailleteau
Managing Director
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Singapore
Thomas J. Byrne
Senior Vice President - Regional Credit Officer Sovereign Risk Group Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308