PIMCO: Spain downgrade overdue recognition by S&P

NEW YORK (Reuters) - Standard & Poor's downgrade of Spain's long-term credit rating is an overdue recognition of the deterioration in the country's underlying fiscal situation, the chief executive of investment firm PIMCO told Reuters.

S&P lowered Spain's long-term rating by one notch to AA, still investment grade but just two notches under AAA. The move follows steeper cuts on Portugal and Greece on Tuesday.

"The rating agency is now catching up and recognizing the deterioration in Spain's underlying fiscal situation and the difficulties that the country now faces in mobilizing large private financing at low interest rates," said Mohamed El-Erian, chief executive of Pacific Investment Management Co.

S&P said in a statement that its outlook on Spain is negative, indicating a possible further downgrade if the "budgetary position underperforms to a greater extent than we currently anticipate." Spain has the euro region's third- largest deficit after Ireland and Greece.

"We initiated early on the sale of Greek, Portuguese and Spanish exposures on account of our concerns about deteriorating public finances," El-Erian said. "We stayed on the sideline and did not participate in any of the recent bond offerings by these countries."

El-Erian helps oversee over $1 trillion in assets at PIMCO.

(Reporting by Jennifer Ablan; Editing by Padraic Cassidy)