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Moody’s Lowers Vietnam Debt Rating

July 9, 1998

NEW YORK (AP) _ A leading credit agency lowered its rating of Vietnam’s debt further into speculative territory Thursday, a step that could make it even more difficult and costly for the financially troubled Asian nation to borrow money.

Vietnam’s ratings on long-term bonds and on bank deposits were already considered speculative, or in the ``junk″ category. Today, Moody’s dropped the rating on long-term bonds to B1 from Ba3, and on bank deposits to B3 from B1.

Only the service’s top four grades are considered investment quality, from a high of Aaa to the lowest investment grade Baa. The rating Ba is a grade below investment quality, and Moody’s uses numbers from a high of 1 to a low of 3 to denote standing within a grade. The B grade is two grades into speculative territory.

The lower the rating, the higher the risk of not being paid on time. That means borrowers typically have to offer higher interest to raise money when ratings are lowered. Some banks and trust funds won’t lend money to or buy bonds from borrowers listed in the speculative-grade rankings.

Moody’s, based in New York, said it lowered the ratings because efforts to reform the Vietnamese economy have stalled, threatening the nation’s balance of payments and the banking sector. Also, the agency said, Vietnam is particularly vulnerable to Asia’s ongoing financial crisis, although so far, foreign exchange controls have kept the Vietnamese economy from going into a tailspin.

Moody’s also cited a slowdown in foreign investment in Vietnam.

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