February 27, 2012 / 5:35 PM / 7 years ago

TEXT-S&P revises European Financial Stability Facility outlook

Overview	
    -- We have concluded that credit enhancements sufficient to offset what 	
we view as the reduced creditworthiness of European Financial Stability 	
Facility (EFSF) guarantors are not likely to be forthcoming.	
    -- We are therefore revising the outlook on the long-term rating on the 	
EFSF to negative from developing and affirming the 'AA+/A-1+' ratings.	
    -- The negative outlook on the long-term rating mirrors the negative 	
outlooks of France and Austria.	
    	
 	
Rating Action	
On Feb. 27, 2012, Standard & Poor's Ratings Services revised its outlook on 	
the European Financial Stability Facility (EFSF) to negative from developing. 	
At the same time, we affirmed the 'AA+' long-term and 'A-1+' short-term issuer 	
credit ratings on the EFSF.	
	
    	
Rationale	
Following the lowering of the ratings on France and Austria on Jan. 13, 2012, 	
the rated long-term debt instruments already issued by the EFSF are no longer 	
exclusively supported by guarantees from the EFSF guarantor members rated 	
'AAA' by Standard & Poor's or 'AAA' rated liquid securities. Instead, the 	
EFSF's instruments are now covered by guarantees from guarantor members or 	
securities rated 'AAA' or 'AA+'. Therefore, on Jan. 16, 2012, we lowered the 	
long-term issuer credit rating on the EFSF, and the issue ratings on its 	
long-term debt securities, to 'AA+' from 'AAA'.	
	
	
At that time, we considered that credit enhancements--in addition to the 	
existing 165% over-guarantee provided by each non-borrowing EFSF member state 	
(see the full analysis listed below)--that would offset our view of the 	
now-reduced creditworthiness of the EFSF's guarantors and securities backing 	
the EFSF's issues could be forthcoming. We have since revised this view. We no 	
longer expect EFSF member states to provide additional credit enhancements to 	
ensure that its rated long-term debt instruments will be exclusively supported 	
by guarantees from the EFSF guarantor members rated 'AAA' by Standard & Poor's 	
or 'AAA' rated liquid securities. 	
	
    	
Outlook	
The negative outlook on the long-term rating on the EFSF mirrors the negative 	
outlooks of France and Austria. Absent additional credit enhancements, we 	
could lower the ratings on the EFSF if we lowered the long-term sovereign 	
credit ratings on any of the EFSF's 'AAA' or 'AA+' rated members (Germany, 	
France, The Netherlands, Austria, Finland, or Luxembourg) to below 'AA+'. 	
	
Ratings List	
Ratings Affirmed; CreditWatch/Outlook Action	
                                        To                 From	
European Financial Stability Facility	
 Sovereign Credit Rating	
  Foreign Currency                      AA+/Negative/A-1+  AA+/Developing/A-1+	
	
Ratings Affirmed	
European Financial Stability Facility	
 Senior Unsecured*                      AA+                	
 Senior Unsecured*                      AA+                	
 Short-Term Debt*                       A-1+               	
	
	
    *Guaranteed by: State of The Netherlands, Republic of France, Republic of 	
Cyprus, Republic of Finland, Republic of Slovenia, Grand Duchy of Luxembourg, 	
Slovak Republic, Republic of Austria, Republic of Portugal, Federal Republic 	
of Germany, Republic of Malta, Kingdom of Belgium, Kingdom of Spain, Republic 	
of Italy
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