RWE downgrades pose hybrid risk

摘要

Moody's one-notch downgrade to Baa2 pushed rwe closer to junk territory on Friday and called into question the agency's future equity treatment of hybrid bonds. The move follows S&P's one-notch downgrade of the German utility to BBB in August, just a month after it issued a €4bn-equivalent hybrid supposed to help stave off such events. Any further S&P and Moody's downgrades would push the company's senior ratings just one notch away from junk and trigger a loss of equity treatment with Moody's. One bond investor said that while the company's summer hybrid issue and recent positive nuclear stress test results should be enough to stave off another downgrade for around 12 months, further negative headlines could not be ruled out. "For the downgrades to be in the mid-BBB range is not too surprising and so any reaction should be fairly limited. But RWE still has plenty of issues, so this might not be the end of it," he said.