Ireland Cut to Junk Rating by Moody’s

(Bloomberg)--Ireland’s credit rating was cut to non-investment grade by Moody’s Investors Service, joining Portugal and Greece to become the third euro-area country to be lowered to junk.

The rating was lowered to Ba1 from Baa3, Moody’s said in a statement today. The outlook remains negative. Portugal’s rating was cut four levels to Ba2 July 5, by Moody’s.

Ireland, which had a top Aaa rating just over two years ago, lost its investment status after a real-estate boom collapsed, fueling bank bailouts and a surge in the country’s debt. The government was forced to seek an 85 billion-euro rescue in November 2010, as Europe’s worst banking crisis overwhelmed the government’s austerity efforts.

“The key driver for today’s rating action is the growing possibility that following the end of the current European Union/International Monetary Fund support program at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support,” Moody’s said in a statement today.

Moody’s cut Ireland’s credit rating two levels on April 15 to the lowest investment grade. Ireland’s debt will rise to 118 percent of gross domestic product in 2012 from 25 percent at the end of 2007, the European Commission has forecast. Taxpayers have pledged as much 70 billion euros to shore up the country’s debt-laden financial system.
Standard & Poor’s on April 1 cut Ireland’s rating one level to BBB+ with a stable outlook. Fitch Ratings affirmed Ireland’s BBB+ rating on April 14 and removed it from “rating watch negative.” It said the outlook is negative. Both firms’ ratings are three levels above junk.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net