S&P cuts Renault bonds to 'junk' and downgrades outlook on PSA

FILE PHOTO: The logo of Renault carmaker is pictured at a dealership in Les Sorinieres, near Nantes, France, February 19, 2020. REUTERS/Stephane Mahe

PARIS (Reuters) - Credit rating agency Standard & Poor's (S&P) delivered downgrades on Thursday to France's top car companies Renault RENA.PA and PSA PEUP.PA, cutting Renault's bonds to 'junk' status due to the impact of the new coronavirus.

S&P downgraded Renault to ‘BB+/B’ from ‘BBB-/A-3’, meaning it had ascribed a “junk bond” status to those Renault corporate bonds.

“French automaker Renault has an ample liquidity cushion and can, in our view, count on guarantees from the French state,” S&P wrote in a research note.

“We nevertheless expect Renault’s earnings, free cash flow generation (FOCF), and financial position to weaken materially in 2020, following an already challenging 2019,” added S&P.

S&P kept a BBB- rating on Peugeot-company PSA, but it cut its outlook on PSA to “negative” from “stable”.

Shares in Renault and PSA were both down by around 1% in late session trading.

Data earlier this month showed that French car registrations had dropped by more than 72% in March due to the coronavirus outbreak and lockdown ordered by authorities to fight the epidemic spread.

Reporting by Sudip Kar-Gupta; Editing by Steve Orlofsky