Банкеръ Weekly



The representatives of Standard Poor's credit rating agency, Mr. Conrad Royce and Ms. Helena Hessel, who visited Bulgaria on September 24 and 25, showed particular interest in the course of the negotiations between the Bulgarian Government and the International Monetary Fund (IMF). During their meetings with the Finance Minister Milen Velchev and his deputy Krassimir Katev they discussed the economic situation in the country, the tax and the budget policy of the Government, as well as the state debt management strategy.The BANKER weekly learned that Mr. Royce and Ms. Hessel gathered the necessary information about a report on Bulgaria, on which basis Standard Poor's will up-date its nation's rating. Long-term government securities are currently rated a B+ and short-term ones - a B. Both estimations are given positive outlook.Ms. Hessel told the BANKER weekly that she was optimistic about Bulgaria's economic development. She said Standard Poor's is 50% likely to increase its rating. However, this will very much depend on the outcome of the negotiations with the IMF mission, she implied.All the three leading credit rating agencies in the world - Standard Poor's, Moody's and FITCH IBCA, had meetings with the Bulgarian Government in the past four months and a half. Nina Ramondeli, Vice President of Moody's State Risk Department, visited the country in the beginning of June. She talked with the then deputy ministers of finance Plamen Oresharski, Dimitar Radev and Nikolay Georgiev. At the end of her visit it became clear that Moody's would wait for the end of the talks with IMF in order to determine Bulgaria's new rating. The agency has been estimating the country since 1996. It has been building its analyses quite conservatively. In 2000 it reduced the outlook of Bulgaria's B2 credit rating of foreign currency bonds and long-term securities from positive to stable. If Bulgarian negotiations with the IMF do not lead to an agreement, Moody's will not change the perspective, experts comment. In the worst case it could reduce the rating of the country.The negotiations between Premier Simeon Saxe-Coburg-Gotha's Cabinet and the IMF are of great importance to FITCH IBCA's experts Edward Parker and Sharon Radge, too. They visited Bulgaria in the beginning of September. Bulgaria's rating of foreign currency long-term securities, provided by this agency, is B+, while short-term ones have a B. Both estimations are given positive outlook.Usually, the estimations that credit rating agencies fix reflect the level of financial and macroeconomic stability of a country. They are carefully observed by foreign investors and companies trading with Bulgarian government securities (Brady bonds and ZUNK bonds). The ratings these three agencies will give will be decisive for the yield which Bulgaria will have to pay on its Eurobonds, in case it decides to launch an issue. Therefore, the higher the estimations, the lower the interests due. Rulers do not hide they are planning to launch an Eurobond issue of EUR250MN face value in 2002. Some experts comment, however, that it will only be useful if its redemption period is at least 10 years and if its annual yield does not exceed 10 per cent.

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