KIIFB to raise funds through Masala bonds KOCHI: In a move expected to help Kerala's attempts to raise resources from overseas capital markets, international credit rating agency S&P Global Ratings has assigned 'BB' long-term rating to the state. This is the first rating by the agency of a local and regional government (LRG) in India.According to S&P website, a resolution counterparty rating of 'BB' indicates marginal creditworthiness in reference to RCR (Resolution Counterparty Ratings) liabilities. "Positive attributes exist, but adverse business or operating conditions could lead to insufficient ability to fulfil the terms of RCR liabilities," it said.Sanjeev Kaushik, deputy managing director, Kerala Infrastructure Investment Fund Board (KIIFB), said the development was a positive news. "We are in the process of issuing Masala bonds , a first for any Indian state-owned entity. These are Indian Rupee-denominated, five-year bonds, to be listed on London and Singapore stock exchanges. The rating is a shot in the arm," he said.While assigning ‘BB’ long-term issuer credit rating and ‘B’ short-term issuer rating to Kerala, S&P kept the outlook on the long-term rating as stable.KIIFB has prepared a global medium term notes (MTN) programme to raise funds through Masala bonds, for which it will be contacting investors in Europe, Middle East, Singapore and Hong Kong.“The maximum amount we can raise is Rs 5,000 crore but we plan to do it over several tranches. Depending on investor feedback, we may have the first tranche of Rs 1,500 crore -2,000 crore,” Kaushik said.The state government had requested S&P Global Ratings and Fitch Ratings to rate its creditworthiness as it is imperative to raise funds overseas.“If you compare our long-term rating of ‘BB’ with ‘BBB-’ of the sovereign India government, you can see that Kerala’s is only one notch below. S&P and Fitch sometimes rate Indian states confidentially for availing World Bank or ADB loans but there aren’t any public ratings so far. However, it is the first time that any state government has gone public with its ratings and S&P and Fitch are telling us that this is the highest rating they have ever given to any Indian state. We are proud of that,” Kaushik said.On the higher rating for the Union government, he said it manages foreign exchange and printing of money. “It also has foreign exchange earnings and FDI coming in. The state governments don’t have that and their ratings will be low,” he said.

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