Ratings agency Moody`s put Mongolia on review for a downgrade on Wednesday, citing concerns about the financing of an upcoming $580 million government-backed bond repayment.
Moody`s said the presence of an "irrevocable and unconditional government guarantee" on the DBM bond meant it would consider a missed payment a default by the Mongolian sovereign which is currently rated Caa1, deep into junk.
The Development Bank of Mongolia`s (DBM) bond falls due on March 21, but there are worries that it lacks the funds to make the repayment itself and the government will have to step in.
Ulaanbaatar has been in talks with China and the International Monetary Fund (IMF) for assistance, but investors are concerned that any bailouts might not be negotiated in time.
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