Fitch Upgrades Iceland's Credit Rating by One Notch

Thursday, 14 Feb 2013 08:08 PM

 

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Iceland moved closer to its next international bond sale after the nation’s credit ratings improved.

Fitch Thursday raised the island to BBB from BBB-, with a stable outlook. That followed a decision last week at Moody’s Investors Service to lift the outlook on Iceland’s Baa3 rating to stable from negative. Both moves followed Iceland’s Jan. 28 court victory over the U.K. and the Netherlands, ending a four- year depositor claims dispute that had threatened to cost the island as much as $2.6 billion in damages.

Iceland has tapped international debt markets twice since its 2008 financial meltdown, which saw its biggest banks default on $85 billion. Since then, the island has surfaced from an international bailout stronger than many of the nations inside the euro area. The island, which is now outgrowing the 17-nation currency bloc, is looking for foreign investments to help speed its recovery.

“We’re always on the lookout for the best possible financing for Iceland,” Finance Minister Katrin Juliusdottir said in an interview late Thursday. Now that the country’s ratings have improved, “we hope that we can obtain even better financing,” she said.

The island sold a $1 billion dollar 10-year bond in May last year, and a $1 billion five-year note in June a year earlier.

The biggest hurdle on the path to restoring investor confidence remains the removal of Iceland’s capital controls, which have been in place since 2008 to prevent a krona sell-off. The nation’s improved ratings will also help unwind the restrictions, Juliusdottir said.

The plan for scaling back the capital controls “is a lot clearer now,” she said. “We can now begin drawing up different scenarios and how we intend to control the outflows.”

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