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Maldives’ Dollar Sukuk Rallies on Officials’ Pledge to Make October Payment; Downgraded to Caa2
September 12, 2024
Maldives’ $500mn 9.875% sukuk due 2026 jumped higher by 1.8 points to trade at 72.5 cents on the dollar. This came after the country’s monetary authority (MMA) said that the government will fulfill its upcoming dollar bond coupon payment due on 8 October. “There remains no doubt that the MMA and the government of the Maldives, together with all related government institutions, will be able to meet all future external debt obligations,” said the MMA in a statement. Maldives faces a ~$25mn coupon payment on its outstanding sukuk. MMA had released the statement in response to the downgrade action by Moody’s.
Maldives was downgraded by a notch to Caa2 from Caa1 by Moody’s. The downgrade follows depletion of forex, with excess domestic liquidity weighing further on limited reserves, due to the exchange rate peg to the USD. According to Moody’s, in the absence of a comprehensive financing package or very drastic policy adjustments, the wide twin deficits and FX imbalances have significant downside risks with an increasing probability of default. Last month, Fitch had downgraded Maldives to CC, citing a similar rationale.
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