Possible downgrade for unsecured debt ratings

RATINGS ON long-term unsecured debt at the six Irish financial institutions guaranteed by the State were placed on review for a possible downgrade by credit rating agency Moody’s yesterday after it warned last week that the Government’s rating could be cut.

The agency said the warning on the institutions’ long-term senior unsecured debt – a form of funding provided to the banks and building societies – follows the possible downgrade of Ireland’s rating within three months.

In a separate note, ratings agency Standard & Poor’s said it was maintaining Anglo Irish’s ratings on “creditwatch” with negative implications, as this reflected its view “of the continuing uncertainties about the potential shape of Anglo’s future operations, following its nationalisation”.

Analyst Claire Curtin pointed out that a revised business plan for the bank has yet to be finalised. Under it, it will attempt to reduce exposure to the property market while under Government control.

The agency said placing Anglo on creditwatch reflected “what we consider to be significant ongoing uncertainties about the future of the bank, such as the Government’s plans in relation to the bank’s strategy, its funding plans and capital requirements”.

The agency said a revised strategy is expected in coming weeks, at which time it will resolve the creditwatch placement, following talks with the bank’s management and the Government.

“Given the statements of support by the Government and our current understanding of the situation, we do not expect, at this stage, that the ratings will be lowered by more than one or two notches and may be affirmed,” said Standard & Poor’s.

Executive chairman Donal O’Connor has said Anglo would “look at evolving from our existing structure to a broader, more diversified business bank” and focus more on sole traders, SMEs and larger businesses.