Asian Infrastructure Investment Bank

China-led multilateral lender AIIB gets top-notch credit rating from Moody’s

Rating from the agency that downgraded China’s sovereign credit rating in May will put infrastructure lender on par with World Bank

PUBLISHED : Thursday, 29 June, 2017, 2:32pm
UPDATED : Thursday, 29 June, 2017, 11:25pm

The China-backed Asian Infrastructure Investment Bank (AIIB) said on Thursday that it had received a top-notch credit rating from Moody’s, the rating agency that just downgraded China’s sovereign credit rating a month earlier.

The long-term foreign currency issuer rating of Aaa granted by Moody’s Investors Service will put the Beijing-based multilateral lender on par with the World Bank and the Asian Development Bank and pave the way for the bank to sell bonds to international investors.

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Moody’s was the first major international rating agency to grant the “highest possible rating” to AIIB, although the rating agency angered Beijing last month by downgrading the country’s sovereign rating for the first time since 1989.

The triple-A rating for AIIB is granted because of the bank’s US$100 billion capital base and prudent policies in risk management, the bank said.

AIIB is widely viewed as a success in Beijing’s economic diplomacy. The bank now has more than 80 members despite resistance from Washington and Tokyo. The bank’s mission is to promote infrastructure financing in Asia and beyond.

The bank lent US$1.7 billion worth of loans last year into nine projects, from a natural gas pipeline project in Azerbaijan to a hydropower station in Pakistan.

Jin Liqun, the bank’s president, said last year that AIIB was looking to sell bonds in Hong Kong, and Soren Elbech, the bank’s treasurer, said at a forum in April that the bank would set up a fund raising programme as soon as it obtained a good credit rating. Moody’s rating will speed up the process.

“The reason for the triple-A rating can be interpreted as the rating for all the good governments standing behind the AIIB”, said Christopher Balding, associate professor at Peking University’s HSBC Business School in Shenzhen.

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“I believe the market will treat AIIB bonds in par with the World Bank. The bonds may not be zero risk, but possibly at a very lower risk level.”

Sir Danny Alexander, the bank’s vice president, said at the World Economic Forum in Dalian on Wednesday that the bank was still in its initial stage of operation and would mobilise private capital to take part in infrastructure projects.