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S&P upgrades Romania from B+ to BB-

S&P rating agency upgraded yesterday Romania's forex debt sovereign by one notch from B+ to BB- while the domestic currency sovereign was hiked from BB- to BB. The outlook on all ratings is stable. Thus, S&P rates currently Romania in line with Fitch IBCA, while Moody's sees the country one notch below [B1]. Compared to its peers, Romania is still one notch behind Bulgaria under S&P's assessment. The move, hinted by the Romanian officials last month, was believed to come in March. Consequently, Romania might immediately proceed with its 7yr EUR 500mn Eurobond issue, indicated by the government officials to be launched "after S&P upgrades the country's sovereign". Concerning S&P's grounding for the move, "the action reflect Romania's continued successful stabilization of the economy, which has begun to display sturdy export and private investment-driven growth, accompanied by a lasting reduction in inflation and interest rates," according to the release quoting credit analyst Helena Hessel. The press release underlines the narrowing of the CA deficit, the increase in the forex reserve and the sustainable external debt growth. The release of S&P reads, the country's reserve coverage of external borrowing requirements and the net public external debt in terms of current account receipts steadily declined since 1999. "Although Standard & Poor's expects the republic's current account deficit and liquidity ratios to worsen in the coming years, reflecting the ongoing modernization of the economy, this is not expected to pose much threat to Romania's balance of payments, given its solid level of reserves and rising non-debt capital inflows," says Hellena Hessel. The agency also mentioned the restructuring of the energy sector as a main criterion for a further upgrade.

(Internet Securities 28.ii.03)

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