S&P set to downgrade Bord Gais and DAA
Published 26/11/2010 | 05:00
Semi-state borrowers are next in line for ratings downgrades with Bord Gais and the Dublin Airport Authority's (DAA) ratings set to be cut by Standard & Poor's (S&P). Downgrades will hurt their chances of raising new debt in future.
The rating for Bord Gais is expected to by cut from A- to BBB, escaping a downgrade to so-called "junk" status. A two- notch downgrade of the DAA would see its rating drop from BBB+ to BBB-, the last grade or notch above junk.
A spokesman for S&P confirmed that the agency was ready to publish news on both companies but would not confirm the expected new ratings. He said publication had been delayed by the need to conform to EU rules on rating agency actions.
The anticipated downgrades follow S&P's cutting its assessment of the Irish state's credit worthiness by two "notches" to A from AA-. Ratings matter to borrowers because investors normally base the rate they charge for lending on the rating.
A "junk" rating would make it very difficult for infrastructure businesses like Bord Gais and the DAA to finance large capital projects.
The DAA borrowed €600m in 2008 to fund the authority's €1.2bn expansion plan. It issued a 10-year bond in May 2008 carrying a yield of 6.59pc, significantly higher than the 6.1pc the DAA offered for its €250m 10-year bond in 2001. It also raised €250m from the European Investment Bank.
Bord Gais has debts of around €1.8bn. It is understood to be well funded but a rating downgrade will be a long term worry.
Credit rating agencies have sharpened there pens in recent days after downgrading the Irish State's measure of credit worthiness.
Yesterday the Moody's agency placed some Irish banks on review for possible downgrades after it said the State faces a "multi-notch" downgrade.