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Rating Action Commentary

ֳ Rates Hungary's 2014 EUR1bn Eurobond 'BBB'

Fri 17 Jul, 2009 - 9:36 AM ET

ֳ-London-17 July 2009: ֳ has today assigned the Republic of Hungary's five-year EUR1bn eurobond a 'BBB' rating. The issue launched and priced today matures on 28 July 2014 and has fixed coupon of 6.75% per annum. AKK, the Government Debt Management Agency, reports the issue price at 99.835% and the spread at 395 basis points over 5-year euro mid-swaps. The rating is in line with Hungary's Long-term foreign currency Issuer Default Rating, which has a Negative Outlook.

Hungary's return to the eurobond market, for the first time since June 2008 and since its EUR20bn IMF-led support package agreed in October 2008, increases its range of financing options and is an important step towards eventually exiting from official support. It follows the restart of regular auctions of HUF-denominated bonds in April 2009 and an increase in the volume of issuance over the past month.

ֳ believes the revised 2009 budget deficit target of 3.9% of GDP is realistic following the fiscal consolidation measures passed by parliament in May, after the appointment of the new technocratic Prime Minister Gordon Bajnai. His government's plans for further fiscal tightening measures in 2010 are encouraging, but will be put to the test in the autumn as parliament debates the 2010 budget. This will come against a background of deep recession - ֳ expects GDP to contract 6.7% this year - and parliamentary elections that must be held by April 2010.

Contacts: Edward Parker, London, Tel: +44 (0) 20 7417 6340; David Heslam, +44 (0) 20 7417 4384.

Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.

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