National Bank of Greece ADR (fka NBGGY)

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Moody’s Sees No Europe Defaults, Portugal at Investment Grade

Dec. 21 (Bloomberg) -- Moody’s Investors Service said it doesn’t foresee defaults or maturity extensions on euro-area debt because the region will likely backstop weaker members, and reiterated that Portugal will likely stay investment-grade.

“Moody’s base-case scenario remains that over the medium term, no euro-zone country will suffer a payment default or otherwise impose losses on private-sector lenders through maturity extensions or other forms of distressed exchange,” the company said in a report today. “The collective willingness of the euro zone to support weaker members through the provision of liquidity will remain an important element of investor protection.”

Borrowing costs in Spain, Ireland and Portugal have surged since European leaders opened the door to making private investors pay for future crises as part of the region’s plans for a permanent rescue facility, which would replace the current bailout fund that expires in 2013. Moody’s is reviewing its ratings of Spain and Portugal for possible downgrades and cut Ireland’s credit grade five levels to Baa1 on Dec. 17.

“Spain’s rating is expected to remain in the Aa rating category, indicating extremely low credit risk, on par with many other strong sovereigns,” the company said. “Portugal’s rating will also remain firmly placed within the investment-grade range, and to the extent that Greece’s rating is repositioned, it will remain at a level consistent with a base-line expectation that Greece will not default over the next five years.”

Spain is currently rated Aa1 by Moody’s, meaning that it would need to be cut three grades to fall out of the Aa bracket to single A ratings. Moody’s rates credit investment grade until it drops below a Baa3 rating.

Moody's blues