Tokyo Electric Power Co’s (TEPCO) corporate credit ratings were lowered to junk status by Standard & Poor’s Ratings Services, which cited an increasing likelihood that banks may restructure some of the utility’s debts.
The power producer, which posted the biggest loss on record for a non-financial Japanese company, had its long-term corporate rating cut to “B+” from “BBB” and short-term corporate rating cut to “B” from “A-2,” S&P said in a statement yesterday. The utility known as TEPCO had its long-term bond ratings reduced to “BB+” from “BBB.”
TEPCO has sought government aid to help cover compensation costs from the disaster at its Fukushima Dai-ichi nuclear power plant crippled by a magnitude 9.0 earthquake and tsunami on March 11. A group of banks led by Sumitomo Mitsui Financial Group Inc had advanced ¥2 trillion (US$24.7 billion) of emergency loans to the utility.
“TEPCO’s worsening financial position increases the likelihood its lender banks could restructure its borrowings,” S&P said.
“Any waiver of loans or distressed restructuring, such as a lowering of interest rates on existing- loans, constitutes a form of default and would trigger a lowering of the corporate credit ratings on TEPCO to SD — Selective Default,” S&P said.
S&P still sees a strong likelihood the government will implement the plan announced on May 13 to help TEPCO finance compensation for damage related to the nuclear crisis.
“It remains unclear from the announcement whether the framework for the scheme is subject to lender banks’ cooperation and, if it is, what form the bank cooperation will take,” S&P said.
Shares of the utility have fallen 85 percent since March 10. TEPCO rose 1.6 percent to close at ¥326 yesterday, before the S&P downgrade.
TEPCO reported a loss of ¥1.25 trillion in the year ended March 31. That eclipsed the ¥812 billion deficit reported by Nippon Telegraph & Telephone Corp for the year ended March 2002. Mizuho Financial Group Inc’s ¥2.38 trillion loss the following year is Japan’s largest.
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