S&P ASSIGNS BB- TO BULGARIA’S NEW EUROBONDS

Views on BG | March 28, 2002, Thursday // 00:00

Standard & Poor assigned a BB-senior unsecured debt rating to the new euro- and dollar-denominated eurobonds issued by Bulgaria, maturing in 2013 and 1025 respectively. The rating is considered to reflect the government’s record of prudent economic and fiscal policies in the face of substantial structural challenges. The Eurobonds were issued in exchange for USD 1.3 BLN in Brady bonds.

"The main impact of the Brady bond exchange will be a reduced exposure to the dollar exchange rate and interest-rate fluctuations, as well as lower debt-servicing costs over the coming decade and some reduction in the net present value of Bulgaria's external debt," said Standard & Poor's credit analyst Konrad Reuss.

"From a rating point of view, however, progress on structural reforms, combined with continued prudent fiscal policies, are the key drivers behind Bulgaria's credit standing," he added.
General government debt, which has been trending downward over recent years, is expected to fall to about 68 % of GDP by the end of this year, which is in line with the median for the double-'B' category.

Net general government external debt is an estimated 52 % of current account receipts in 2002, however, which remains significantly above the double-'B' median, despite a similar downward trend. Bulgaria's economy is expected to grow by 4.5 %-5% in real terms in 2002 and 2003, while the current account deficit is likely to remain at about 6%-7% of GDP, or close to USD 1 BLN. Together with about USD1.5 BLN in amortisation and short-term external debt, the projected current account deficit adds up to a significant financing gap.

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