EU Loan Accord Very Significant for Ireland, Moody’s Says
Moody’s Investors Service Inc. said a European agreement in principle to consider extending the maturities on some Irish bailout loans is “very significant.”
Together with last month’s accord to stretch out the bailout of the former Anglo Irish Bank Corp., extending the loans “makes a big difference,” said Kristin Lindow, lead sovereign analyst on Ireland at Moody’s in a telephone interview from New York today. “We consider this to be another credit positive event for Ireland.”
European Union finance ministers meeting in Brussels on March 5 agreed to ask bailout authorities to recommend the “best possible option” for helping Ireland and Portugal regain full market access as they near the end of their bailout programs. Moody’s has Ireland at Ba1, the rating company’s highest non-investment rating, with a negative outlook. Moody’s is the only one of the three large ratings companies to have the country on a non-investment rating.
“If we don’t think we are likely to downgrade within the next 12-18 months, then at that point we would move back to stable. I can’t say when that point would be,” Lindow said. “We are looking at this as we always do, and at some point we will determine if the balance of risks has shifted, but right now the negative outlook is still in place.”
For Ireland, five options are under consideration, two EU officials said on condition of anonymity because deliberations are still under way. The alternatives include doing nothing, re- profiling the loans so that more of them come due later without extending overall aid maturities, or giving extensions of 2 1/2, 5 or more than 5 years, the officials said.
The EU may consider rescheduling at least 10.5 billion euro of Irish rescue loans due to mature in 2015 and 2016, Dublin- based securities firm Davy said.
The yield on Ireland’s bonds maturing in October 2020 fell 3 basis points to 3.72 percent today.
“While a straight uplift to investment grade in one fell swoop might be a bit too heroic at this juncture, a shift to positive outlook, before a move to BBB- later in the year, remains our central forecast,” said Owen Callan, an analyst at Danske Bank A/S in Dublin.
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