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On October 3 2001 Standard & Poor's raised the Republic of Ireland's long term sovereign credit rating from AA+ to AAA. Ireland is now one of only six EU countries to have a AAA rating, the others being Austria, France, Germany, Luxembourg and The Netherlands. Although, in comparison with other EU countries, Ireland has a small economy, the diversity and stability of the economy is reflected in this new rating.

The Irish National Treasury Management Agency had campaigned for some time for this re-rating. Recent global economic events may result in the Irish government seeking to raise new funds within the next year and it should now be able to do so at lower rates than was previously possible.

An immediate consequence of the raise in the sovereign credit rating was a raise in the rating of the I£190 million ($218 million) 7.625% asset-backed Ulysses bonds. These bonds were issued by way of securitizing Irish local government authority mortgages and are supported by the sovereign credit rating.

Although the above credit ratings have been reviewed upwards, the rating of a recent Irish securitization vehicle, Leonardo Synthetic, that was at least two times over subscribed in May 2001, has been placed on negative watch by Moody's and Fitch. This review was prompted by the recent negative changes affecting European airlines as the Leonardo transaction involved a synthetic securitization of aircraft finance and aviation industry loans.

William Fogarty and Turlough Galvin

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