Bord Gais credit rating cut with negative outlook
Published 21/12/2010 | 05:00
THE credit rating for Bord Gais was cut last night as last week's downgrade of Irish government debt by ratings agency Moody's rippled through the semi-state sector.
Moody's downgraded state-owned Bord Gais to Baa1 from A2 following the agency's previous downgrade of the State.
The ratings outlook is negative, meaning it expects that any further rating change will be downwards.
That is based on risks of a possible sale of the business to raise money for the Government and fears it could be hit by new taxes as the economy flounders, according to Moody's.
The agency said the new rating for Bord Gais reflected the gas supplier's strength as a standalone entity. It said the company no longer got any ratings "uplift" as a result of its ties to the State.
Semi-states are normally given a slightly higher rating because of the implied state support when things go wrong.
As the State is seen as weaker, the implied support is considered less valuable by ratings analysts.
Moody's analysts said the revised Bord Gais rating was in line with a previously unpublished standalone rating of Baa1.
The ratings agency said about €550m of long-term debt borrowed by Bord Gais was affected by the move.
The downgrade will have a limited impact because the borrower is still considered 'investment grade', meaning most institutional investors are still able to own its debt.
A downgrade to 'junk' status would have forced some investors to sell their Bord Gais bonds and could have made it harder for the company to raise debt in the future. Even the more limited downgrade that has been published will increase the cost of new debt.
Moody's said the downgrade was a direct result of the downgrade of the state's debt rating.
It said Bord Gais benefits from a strong business risk profile and the predictable revenues generated by its regulated domestic gas transmission and distribution activities.
Bord Gais is the only semi-state company rated by Moody's. Rival S&P rates Bord Gais and the Dublin Airport Authority.