Less than a month after making the decision to stop short of slashing struggling Spain’s credit-rating to below investment grade, top ratings agency Moody’s Investor’s Service had its knives out again.
On October 10th Moody’s decided to keep Spain’s sovereign rating just one step above junk level at Baa3, the lowest level of investment grade.
This time five Spanish regions were unable to sidestep the brunt of Moody’s enthusiastic hacking. Andalucía was taken from Ba2 to Baa3, Castilla-La Mancha dropped from Ba2 to Ba3, Extremadura was cut down to Baa3 from Ba1 and Murcia was slashed back from Ba1 to Ba3.
The last region left licking its wounds after this recent slashing spree was Catalonia, Spain’s largest regional economy. Whether this development will have an influence on the results of Catalonia’s upcoming election regarding seeking autonomy from Spain remains to be seen.
Moody’s also assessed the Basque Country, Diputacion Foral de Bizkaia, Castilla y Leon, Galicia, Madrid and Valencia but left their ratings unaltered.
Moody’s cited the ‘deterioration in [the regions] liquidity positions, as evidenced by their very limited cash reserves as of September 2012 and their significant reliance on short-term credit lines to fund operating needs’ as the reasoning behind the regional rates cuts which did occur.
The top ratings agency further commented that Andalucía, Catalonia and Murcia in particular face ‘large debt redemptions’ as retail bonds issued in 2011 mature in this quarter.
Despite Prime Minister Mariano Rajoy’s recent Galicia victory in the Spanish regional elections bolstering confidence in his leadership abilities and raising expectations regarding the nation seeking a bailout, the view of Spain’s creditworthiness is bound to be shaken by this latest development.
As of 10:05
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