NEW YORK USA: Standard & Poor's Ratings Services said Wednesday that it assigned its 'B-' rating to Grenada's proposed step-up U.S. dollar and Eastern Caribbean (EC) dollar bonds due Sept. 15, 2025. (The size of the issue will be determined by the participation rate in the proposed debt exchange, which has an Oct. 7, 2005, participation deadline.) The rated bonds will be tendered in exchange for the following rated defaulted securities: US$100 million 9.375% bond due 2012, and US$41.5 million 7.15% bond due 2014; and for approximately US$47 million and EC$238 million (or US$88 million) of unrated securities. Upon completion of the exchange offer, Standard & Poor's expects to raise its long-term foreign currency sovereign credit rating on Grenada to 'B-' from 'SD', its long-term local currency sovereign credit rating to 'B-' from 'CCC', and its short-term foreign currency rating to 'C' from 'SD'. The new ratings will incorporate Standard & Poor's expectation that the successfully completed debt restructuring, combined with the ongoing strong donors' support and necessary fiscal adjustment, will alleviate fiscal pressure and the government's debt service. According to Standard & Poor's credit analyst Olga Kalinina, all of Grenada's external bonds, domestic and external commercial loans, all but one domestic bond, and five of the sovereign's 17 guaranteed claims are included in the exchange offer. The offer excludes bilateral and multilateral debt and the government's Treasury bills. "The principal amount of the new bonds will equal that of the exchanged obligations (US$277 million) plus the interest accrued but unpaid on them through Sept. 15, 2005," said Mrs. Kalinina. "At the same time, the new bonds will have longer maturities and a lower average coupon than the sovereign's original debt obligations; specifically, the offered step-up schedule envisages an interest rate on new bonds of 0.85% payable during the first three years (2005-2008) and then rising to 8% by 2015," she added. The ratings on the new bonds are contingent upon the successful completion of Grenada's debt exchange, with the tender of at least 85% of the total principal amount of eligible claims required for the closure of the offer. "Grenada's new bond rating is constrained by a high government debt burden and large fiscal deficits, as well as by the continuing challenge of restructuring the island's economy, which was devastated by Hurricane Ivan," Mrs. Kalinina noted. "However, Grenada's economy is expected to enter a recovery phase in 2006, reflecting the rebound of tourism and agriculture. The rating is also supported by the government's expected commitment to prudent fiscal management," she concluded. Reprinted from Caribbean Net News caribbeannetnews.com