STATE-OWNED energy company Bord Gáis does not expect the downgrading of its credit rating to affect plans to raise €500 million from international debt markets.
Credit ratings agency Moody’s, which measures organisations’ ability to pay their debts, cut the rating of the company’s short-term debt to prime 3 from prime 2, and that of its finance subsidiary to Baa3 from Baa1.
Moody’s took similar steps with Bord Gáis’s larger State-owned rival, the ESB, re-ranking the company’s guaranteed debt to prime 3 from prime 2 and that of its subsidiary to Baa3 from Baa1.
The move means both companies could pay higher interest on future borrowings, as the agency believes there is a higher risk that they will default on their debts, although the overall ratings still imply that the probability of this happening is low.
The Government-guaranteed debt of Allied Irish Banks and its subsidiary, EBS; Bank of Ireland; Anglo Irish Bank; and Irish Life and Permanent were also downgraded after Moody’s lowered the Irish sovereign debt rating to “junk” status on Tuesday.
The State-backed debt at the banks was downgraded to Ba1, the highest junk or non-investment grade rating, from Baa3.
Moody’s didn’t change its ratings on the unguaranteed long-term senior unsecured debt at the five banks, which will be either partly or fully owned by the State.
It is understood the re-rating of Bord Gáis debt will not affect the company’s plans to borrow €500 million from international banks, as this deal has been finalised.
The company is expected to announce details of this shortly.
Bord Gáis has debts of €1.8 billion, while the ESB’s liabilities are €3.9 billion, partly as a result of its purchase of Northern Ireland Electricity last year.
Moody’s acknowledges that both companies are financially sound in their own right, but points out that both are owned by the State, which has had its rating downgraded to junk status, and have a big exposure to the Irish economy. At the same time, the agency points out there are long-term question marks over the current structure of both groups, which own their respective transmission networks and energy supply businesses.
The Government may take steps to split both businesses, or take direct control of the networks off both groups, while there is also the possibility that it will consider the partial privatisation of one or both businesses.
Moody’s maintained the outlook on the debts of the five Irish banks at negative, meaning they may face future possible downgrades by the agency.
The ratings on the banks’ senior unguaranteed unsecured debt could be lowered further if there was further economic decline or if policy changed, “implying a greater willingness to impose losses on bondholders”.
Moody’s said it would continue to monitor whether the Government would imposes losses on this class of senior bondholders.
