S&P: privatisation capital to rating upgrade

Successful privatisation is the main requirement Romania has to meet in order to get “investment grade” for country rating, says Kevin Daly, Standard & Poor’s sovereign rating director.
The “investment grade” rating is actually the level at which the country risk is considered to be suitable for most investors, those less sophisticated inclusive.
“Privatisation is important because the state-owned assets are not fully working and are subsidised. The massive foreign capital inflows in other countries have made companies efficient and have improved the public budget, too,” Daly said.
The Standard & Poor’s official explains that one of the key elements of the privatisation process is privatising the utility companies, as well as continuing the privatisation of Banca Comerciala Rom=na (Romanian Commercial Bank – BCR) and of the other state-run companies.
The ten states to join the European Union in 2004 had the same ratings as Romania does now when they first started accession negotiations, but as the process progressed, they made it into the group of countries rated BBB, which is the first step showing a safe investment climate.
“Romania’s rating has been upgraded by Standard & Poor’s twice in the last twelve months. The important signal here is that the rating outlook is positive, so that it may be upgraded again in the next six months,” Daly said.
He specified the rating upgrade was up to the reform progress, given Romania’s EU accession, so that if compared with the other applicant states, Romania could get a BBB by 2007, its accession deadline.
He added the increase in the budget deficit Romania was planning to operate next year would not make any major impact on the rating, unless the fiscal policy seriously drifted away from course. If this is so, then the rating outlook may be changed from positive to stable.
S&P’s latest rating modification was done on February 27, 2003, when it upgraded Romania’s rating for the long-term debt in national currency from “BB minus” to “BB” and the rating for the long-term foreign currency credits from “B plus” to “BB minus”.
According to the Standard & Poor’s definition, the BBB country rating for long-term loans shows an adequate financial capacity to cover the financial commitments taken. At the same time, the financial rating agency deems investments in countries rated as “BB”, “B”, “CCC” and “CC” as speculative. The least speculative threshold is “BB”, while a “CC” rating shows a higher risk degree.
Moody’s Investor Service financial rating agency last year upgraded Romania’s rating for the foreign-currency denominated bond issues from “B2” to “B1”, as well as the rating for foreign currency banking deposits from “B3” to “B2”.
Also Fitch Ratings at the end of October 2002 upgraded the rating for the long-term foreign currency debts from “B plus” to “BB minus” and improved the rating for the long-term loans in national currency from “BB minus” to “BB”.