S&P cuts European Financial Stability

Standard & Poor's said it lowered the AAA long-term issuer credit rating on the European Financial Stability Facility to AA+ from AAA and affirmed the short-term issuer credit rating at A-1+.

The agency said it also removed the ratings from CreditWatch, where they had been placed with negative implications on Dec. 6. The outlook is developing.

When the placement of the ratings on the EFSF on CreditWatch was announced on Dec. 6, S&P said that it would likely align the issue and issuer credit ratings on the EFSF with those of the lowest issuer rating assigned to the EFSF members rated AAA, unless sufficient credit enhancements were in place to maintain the EFSF rating at AAA.

On Jan.13, the agency announced rating actions on 16 members of the European Economic and Monetary Union. The agency lowered to AA+ the long-term ratings on two of the EFSF's previously AAA rated guarantor members, France and Austria.

Following the lowering of the ratings on France and Austria, the rated long-term debt instruments already issued by the EFSF are no longer fully supported by guarantees from the EFSF guarantor members rated AAA or AAA rated liquid securities. Instead, they are now covered by guarantees from guarantor members or securities rated AAA or AA+, the agency said.

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