Moody's Investors Service has assigned a B2 rating to the $500 million bond maturing on December 16, 2020 issued by the government of Honduras . The rating matches Honduras' B2 issuer rating, whose outlook was revised to negative from stable on February 26, 2013 . This was Honduras' second bond placement on international capital markets. The first took place in March of this year and involved a $500 million 11-year bond. At the beginning of the year, congress approved government debt issuance of up to $750 million in 2013. That amount was increased to $1 billion last week, thus allowing the government to issue another $500 million bond this year. RATINGS RATIONALE The B2 rating with a negative outlook reflects (1) the deterioration of the government accounts in 2012 and 2013, partly related to this year's elections; (2) a weakening of the external accounts that has led to a widening current account deficit that has been only partially covered by foreign direct investment inflows. Consideration of a stable outlook will require clear evidence of fiscal consolidation, as well as material improvement in the external accounts. Alternatively, the rating could come under downward pressure in the event of a continued and marked deterioration of fiscal and/or external finances.
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