S&P lifts Cyprus

Standard & Poor's said it raised the long-term foreign- and local-currency sovereign credit ratings on the Republic of Cyprus to CCC+ from SD (selective default).

The outlook is stable.

The agency also said it raised the short-term foreign- and local-currency sovereign credit ratings on Cyprus to C from SD, along with its existing debt to CCC+.

On July 1, the Republic of Cyprus exchanged of a number of local law bonds totaling €1 billion into five separate issues with similar coupons and longer maturities.

The exchange included the tender of $667 million of $715 million bonds due July 4, 2013, S&P said.

The upgrade follows the completion of what is viewed as a distressed exchange.

Cyprus's economic prospects are expected to remain difficult, S&P said. Economic growth will depend on it reorienting its economic base, likely including the development of offshore gas fields, the agency said.

Expected downsizing in the public and financial services sectors, as well as the banking system, will likely lead to significant job losses in these areas as well as in real estate and tourism, S&P said.

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