Moody's lowers rating two notches of Slovenia, relegated to ... - Romandie.com

Moody’s lowers rating two notches of Slovenia, relegated to junk

LJUBLJANA – The rating agency Moody’s Investors Service downgraded two notches Tuesday note Slovenia, relegating among borrowers at risk (hedge), because of the situation of its banks and the deterioration of public accounts.

The prospect of changing this rating remains negative, which means Moody’s does not exclude degrade back to medium term.

The agency believes that the uncertainty about the funding of the country contribute to the possibility that more severe than its major competitors to the small alpine country, part outside help is needed.

Moody’s the euro area. Both Fitch Ratings and Standard & Poor’s noted indeed a step above at A-and always in the investment category for reliable borrowers.

The snub inflicted by Moody’s has forced the Slovenian authorities suspend hastily bond issue that would have allowed the country to raise 2.2 billion euros in debt five and ten years. The Ministry of Finance has blocked the operation even before the official announcement of the agency, highlighting a probable decision on notation.

According to the business daily Finance, the operation had yet well received by investors, with demand exceeding supply twice.

According to Moody’s, the main factor behind the decline of the note is the situation of the Slovenian banking sector. For the agency, it was highly likely that the state would have to inject new funds, to the extent that the quality of bank loans is constantly deteriorating since 2012.

Moody’s believes the rate of claims doubtful Slovenian banks around 20% of their total assets at the end of last year. The agency estimates that rebuilding the banking system will require injections of funds representing between 8 and 11% of gross domestic product.

Moody’s is also concerned about the rapid deterioration of public accounts noting that the debt had increased from 22% of GDP in 2008 to 54.1% in 2012 and it is expected to exceed 60% at the end of the year. This ratio could reach 70% to 75% of GDP after the rescue of the banks.

The center-left government of Prime Minister Alenka Bratusek, in place since March, is currently working on remedies th at will submitted to the European Commission on May 9

Excluding recapitalization of banks, Slovenia has enough cash to last until the end of the year, Moody’s rating.

Despite the difficulties of its banks, the former Yugoslav republic had indeed succeeded earlier this month to raise 1.1 billion euros in the short term.

(© AFP / April 30, 2013 7:56 p.m.)