S&P pulls Papua New Guinea from watch

S&P said it affirmed Papua New Guinea’s B- long-term foreign- and local-currency sovereign credit ratings. At the same time, the agency removed the ratings from CreditWatch with negative implications, where it had placed them on April 30. The outlook is negative.

“We have removed our ratings from CreditWatch after receiving information regarding a government-guaranteed debt transfer originally owed by Eda Kopa (Solwara) Ltd. (EKS). EKS is a subsidiary of state-owned Kumul Minerals Holdings. The debt transfer was a refinance initiated by Kumul Minerals Holdings after the original project–Solwara 1 offshore mining– as deemed not viable to proceed. EKS was unable to meet the bullet payment on April 24, 2021, and the loan was refinanced with the government on March 28, 2021,” S&P said in a press release.

“The creditor, Bank of South Pacific Ltd. (BSP), received all interest payments from the government up to maturity of the original loan and, therefore, we deemed the transaction to be a refinancing, not a restructuring. The additional information that we received from the government also assuaged our concern over a potential sovereign default within the next year or so,” the agency said.

The outlook reflects a one-in-three chance of a downgrade over the next 12 months due to Papua New Guinea’s weak fiscal position and rapidly increasing debt levels, S&P said.

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