Following is the original text of the press release of Fitch Ratings:

NEW YORK, March 22 - Fitch Ratings has today assigned a Long-term foreign currency rating of 'BB-' (BB minus) to the Republic of Bulgaria's new euro and US dollar-denominated eurobonds, maturing in 2013 and 2015, respectively, which will be issued as part of a Brady bond exchange.

The rating on the new eurobonds is in accordance with the sovereign's Long-term foreign currency Rating, on which the Outlook is Stable.

The agency said that the exchange will reduce Bulgaria's exposure to US dollar and floating interest rate debt, lower its debt service payments over the next ten years and reduce the face value of its debt somewhat.

Fitch will look more closely at the impact of the exchange once the final terms are announced.
Fitch estimates that Bulgaria's levels of public and external debt were 71% and 75% of GDP, respectively, at end-2001.

These debt ratios are well above the median of 'BB' rated sovereigns of 51% on both counts, and thus a significant constraint on Bulgaria's rating.

Preliminary results of the exchange indicate that Bulgaria will issue around USD510 million of the 2015 eurobonds with a coupon of 8.25% and around EUR835m of the 2013 eurobonds with a coupon of 7.5%, in exchange for around USD1.33 billion of its USD4.78bn Brady bonds.

On 14 January, Fitch upgraded Bulgaria's Long-term foreign currency rating to 'BB-' (BB minus) from 'B+', reflecting the new government's prudent fiscal targets and ambitious structural reform programme.

The implementation of these policies, the government's commitment to the currency board arrangement and the EU accession process should underpin economic stability, reduce vulnerability to shocks and raise living standards. Bulgaria's rating is also supported by a strong liquidity position.

Nevertheless, the agency warned that Bulgaria faces significant risks.

Specifically, Fitch expects a current account deficit of 6.3% of GDP this year, which together with external debt amortisation of around USD750 million, adds up to a sizeable external financing requirement.

In addition, political risks have heightened in recent months.

The government's failure to live up to its ambitious election pledges and reduce the high rate of unemployment of around 18% has led to a sharp drop in its popularity and the desertion of five MPs.

Fitch is wary of the risk that this could pressure the coalition government into loosening fiscal discipline and backtracking on painful reform measures.

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