(2 February 2010 – Europe) Ratings agency Standard & Poor’s has cut its credit grade for Ireland this week, warning it could fall further due to doubts surrounding the true scale of defaulting loans in the country’s state-owned banks.S&P followed rival agencies Moody’s and Fitch in dropping Ireland’s credit score following the nation’s November negotiation of a potential €67.5 billion (A$9.45 billion) credit line from the European Union and International Monetary Fund.
Ireland already has drawn down €8.4 billion this year from that rescue fund.
Standard & Poor’s reduction was just one notch to A minus, one step above the multi-grade cuts imposed last month by Moody’s and Fitch.
Both dropped Ireland into the higher-risk BBB tier in the immediate wake of the EU-IMF bailout deal. The BBB level is considered the lowest investment-grade rating, whereas BB and lower indicate ‘junk bond’ status.
S&P senior analyst Frank Gill warned the agency could also drop Ireland’s rating somewhere into the BBBs in April, once a new Irish government settles in and the impact of the current infusion of EU-IMF cash into Dublin banks can be assessed.