S&P cuts TEPCO's credit rating to junk
Source: Agencies |
May 31, 2011, Tuesday
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Print Edition
Print Edition
RATINGS agency Standard and Poor's cut its credit rating on Tokyo Electric Power to junk status yesterday, saying the utility's bank lenders were more likely to be forced to write off debt as part of a restructuring scheme to compensate victims of an ongoing nuclear crisis.
S&P said it had lowered the long-term credit rating of Tokyo Electric, known as TEPCO, one of the most active bond issuers in Japan, to B+ from BBB, while cutting the rating on the utility's secured bonds to BB+ from BBB.
The agency said it viewed a default on TEPCO's 5 trillion yen (US$62 billion) in corporate bonds as less likely than a restructuring of its bank debt.
Japan's government earlier this month agreed to set up a fund with taxpayers' money to help TEPCO avoid insolvency and compensate victims of the radiation crisis at its Fukushima Daiichi nuclear plant, where reactor cooling systems were damaged by the March 11 earthquake and tsunami.
But Chief Cabinet Secretary Yukio Edano has said the government scheme, which still needs parliamentary approval, would be unlikely to gain public support unless TEPCO's banks agreed to waive some of the debt they are owed by the utility, a step they have resisted.
S&P said a restructuring of TEPCO's bank debt would be a "selective default," and it now regarded the probability of "extraordinary" Japanese government support for TEPCO as "high" rather than "very high," the phrase it had previously used.
"Standard & Poor's now believes that some politicians think banks should share the burden in some form, which may fall into our definition of default," S&P said in a statement. "We now think such a scenario is more likely than previously thought."
TEPCO is Japan's largest corporate bond issuer and its shares are widely held by financial institutions.
Moody's Investors Service said on May 19 it may review the credit ratings of TEPCO if Japan fails to pass laws to help the utility handle compensation payments related to its disabled nuclear plant.
S&P said it had lowered the long-term credit rating of Tokyo Electric, known as TEPCO, one of the most active bond issuers in Japan, to B+ from BBB, while cutting the rating on the utility's secured bonds to BB+ from BBB.
The agency said it viewed a default on TEPCO's 5 trillion yen (US$62 billion) in corporate bonds as less likely than a restructuring of its bank debt.
Japan's government earlier this month agreed to set up a fund with taxpayers' money to help TEPCO avoid insolvency and compensate victims of the radiation crisis at its Fukushima Daiichi nuclear plant, where reactor cooling systems were damaged by the March 11 earthquake and tsunami.
But Chief Cabinet Secretary Yukio Edano has said the government scheme, which still needs parliamentary approval, would be unlikely to gain public support unless TEPCO's banks agreed to waive some of the debt they are owed by the utility, a step they have resisted.
S&P said a restructuring of TEPCO's bank debt would be a "selective default," and it now regarded the probability of "extraordinary" Japanese government support for TEPCO as "high" rather than "very high," the phrase it had previously used.
"Standard & Poor's now believes that some politicians think banks should share the burden in some form, which may fall into our definition of default," S&P said in a statement. "We now think such a scenario is more likely than previously thought."
TEPCO is Japan's largest corporate bond issuer and its shares are widely held by financial institutions.
Moody's Investors Service said on May 19 it may review the credit ratings of TEPCO if Japan fails to pass laws to help the utility handle compensation payments related to its disabled nuclear plant.
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