Are you sure?

Fitch assigns Hungary €1 bln eurobond 'BBB-' rating

Fitch Ratings on Tuesday said it assigned a seven-year eurobond launched by Hungary early in May a 'BBB-' rating. The rating is the same as Hungary's longer-term foreign currency Issuer Default Rating (IDR).

Fitch downgraded Hungary's Long-term foreign currency IDR to 'BBB-' with a Negative Outlook from 'BBB' on December 23, 2010. The downgrade reflected a material worsening in the underlying medium-term budget position, while relatively high levels of public, external and domestic foreign-currency bank debt leave the country vulnerable to negative shocks, Fitch said.

Fitch said it viewed Hungary's Structural Reform Program, dubbed the Széll Kálmán Plan, unveiled by the government on March 1, as an "important step towards addressing the medium-term structural budget deficit".

But it noted that some details of measures in the program "have yet to be fleshed out" and it sees "some implementation risks for the fiscal consolidation program".

Fitch also views the growth target in the program "as optimistic" but noted that the government's deficit reduction plans is based on a more realistic GDP growth forecast of 3-3.3% for the years 2011-2014.

The €1 billion seven-year eurobond launched by Hungary on May 4 was almost five times oversubscribed, the government debt agency (ÁKK) said earlier. ÁKK said 250 investors were in the orderbook for the transaction.

The bond was priced at 270bp over mid-swaps. It carries a 6% annual coupon and the issue price was 99.356%.

The bond completes ÁKK's €4 billion gross foreign issue plan for 2011.

Hungary last issued a eurobond in July 2009. It sold €1 billion of five-year bonds in the offer, its first foreign issue after the crisis. The bond had a 6.75% coupon and was priced to yield 432bp over the comparable German bund.

Hungary is rated 'Baa3' by Moody's Investors Service and 'BBB-' by Standard & Poor's.