AKIPRESS.COM - Moody's Investors Service has downgraded the foreign currency issuer rating of Development Bank of Mongolia LLC (DBM) to Caa1 from B3. At the same time the backed senior unsecured debt and MTN program rating are downgraded to Caa1/(P)Caa1 from B3/(P)B3. Also, BCA/adjusted BCA are downgraded to ca from caa1. Counterparty Risk Assessment B3(cr) is confirmed, and NP(cr) is affirmed.

Moody's decision to downgrade Mongolia's issuer and bond ratings to Caa1, from B3, is driven by the following factors:

1. Heightened uncertainty regarding the government's ability to meet its direct and indirect debt service obligations over the next two years and to shore up Mongolia's external liquidity;

2. Moody's expectation that the budget deficit will remain wider for longer than previously expected, which, combined with a weaker growth outlook in the coming 2 years, will raise the government's debt burden to elevated levels.

Moody's expects the government to provide support to Development Bank of Mongolia.

In brief:

- downgrade of DBM's BCA to Ca from Caa1 reflects rising short-term liquidity pressure stemming from $580 million payment due march 2017;

- downgrade driven by increased uncertainty over ability to meet its direct and indirect debt service obligations over next 18 months;

- downgrade driven by expectation that budget deficit will remain wider for longer, combined with weaker growth outlook in next 2 years, will raise government's debt burden.