It’s Much Ado About Nothing as Tanzania Frets Over Credit Rating

DAR ES SALAM (Capital Markets in Africa ) – Tanzania may be less than enamoured with its first credit rating, but there’s little to suggest the gas-rich East African nation would be blocked from the Eurobond market that it’s long been tempted to tap.

After discussing plans to get a rating for at least a decade, Tanzania obtained one of B1, four steps into junk territory, from Moody’s Investors Service on Friday. Government officials weren’t impressed. Dotto James, the permanent secretary in the finance ministry, told Dar es Salaam-based The Citizen newspaper that the assessment was premature and unrealistic.

Moody’s said while annual growth would probably average 6.7 percent until 2020, the outlook was negative because of Tanzania’s “very low institutional strength” and “moderately effective monetary policy.”

Tanzania already has $333 million of floating rate notes outstanding, which mature in March 2020 and pay Libor plus 600 basis points. The price has fallen since late January to 103.6 cents on the dollar, around the lowest in more than a year.

Still, that fall is more or less in line with the selloff of other African securities in that period. And the new rating itself shouldn’t be too much of a barrier if Tanzania decides to sell a Eurobond: Moody’s has placed it one level higher than regional neighbours Kenya, Rwanda and Uganda.

Kenya’s ability to attract $14 billion of orders for a $2 billion deal last month suggests yield-hungry bond investors are more than happy to buy the debt of junk-rated African sovereigns.