Fitch rates Croatia bonds BBB-

Fitch Ratings said it assigned a BBB- rating to the Republic of Croatia's $1.25 billion 10-year sovereign bonds. The rating is in line with Croatia's BBB- long-term foreign-currency issuer default rating.

The outlook is negative.

The bond issue is equivalent to 2% of forecast 2010 GDP, the agency said, and underlines the sovereign's ongoing international capital market access and contributes significantly to the budget deficit financing needs this year, which Fitch forecasts at 3.9% of GDP.

Fitch said immediate financial market stress has eased somewhat since it revised Croatia's outlook to negative in May 2009, reflecting an easing of external risk aversion, a stabilization of official exchange reserves and reduced downward pressure on the kuna and domestic liquidity provision by the central bank.

Nevertheless, the economy's highly euro-ized nature, high external debt burden and large financing needs amid an ongoing recession continue to constitute downside risks to creditworthiness, the agency said.

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