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Fitch Downgrades Ireland to A+ from AA-


athlonedub

Well-known member
Joined
Jan 16, 2006
Messages
431
Fitch Downgrades Ireland to 'A+'; Outlook Negative
>2010-10-06 11:04:30.471 GMT
>
>FITCH DOWNGRADES IRELAND TO 'A+'; OUTLOOK NEGATIVE
>
>Fitch Ratings-London-06 October 2010: Fitch Ratings has
>downgraded the Republic of Ireland's (Ireland) Long-term
>foreign and local currency Issuer Default Ratings (IDRs) to
>'A+' from 'AA-' respectively. The Outlooks on the Long-term
>IDRs are Negative. Fitch has simultaneously downgraded
>Ireland's Short-term foreign currency IDR to 'F1' from 'F1+'.
>
>The Euro Area Country Ceiling of 'AAA' remains unchanged. The
>notes issued by the National Asset Management Agency (NAMA)
>have also been downgraded to 'A+'
>from 'AA-' and to 'F1' from 'F1+', in line with the sovereign ratings.
>
> >"The downgrade of Ireland reflects the exceptional and
>greater-than-expected fiscal cost associated with the
>government's recapitalisation of the Irish banks, especially
>Anglo Irish Bank," said Chris Pryce, Director in Fitch's
>Sovereign Group. "The Negative Outlook reflects the
>uncertainty regarding the timing and strength of economic
>recovery and medium-term fiscal consolidation effort."
>
>Typically a Negative Outlook implies a slightly greater than
>50% probability of a further downgrade over a 12-24 month
>horizon. The triggers for a revision of the Outlook to Stable
>would be evidence of sustained economic recovery and fiscal
>consolidation. The ratings could be downgraded further if the
>economy stagnates and broad-based political support for and
>implementation of budgetary consolidation weakens.
>
>Fitch believes that the latest government estimate - announced
>on 30 September - of the fiscal cost of recapitalising Irish
>banks and the transfer of assets to NAMA are plausible,
>particularly if account is taken of the additional EUR5bn
>estimated for the stressed case. Moreover, the large cash
>buffer of more than EUR20bn, around EUR14bn of uncommitted
>funds of the National Pension Reserve Fund (NPRF) as well as
>ongoing bank funding support from the ECB means that Ireland
>still retains considerable financial flexibility. Despite the
>weak performance of the economy, the underlying budgetary
>position remains in line with the targets set out in the 2010
>Budget and Fitch expects a further strengthening of the fiscal
>consolidation effort to be set out by the Minister of Finance
>in November.
>
>On the basis of its central case, the government's total
>direct bank bailout costs will rise to EUR45bn from the
>EUR23bn assumed at the time of Fitch's last rating action on 4
>November 2009. Of this EUR45bn, EUR29.3bn will be on account
>of Anglo Irish Bank ('BBB-'/RWN), already 100%-owned by the
>state. The remainder will be spread over the other four Irish
>banks. In some cases government assistance has been given
>indirectly by the state-owned NPRF in which case the
>transactions will show up as a rise in net debt, rather than
>the more commonly used gross debt measure.
>
>General government gross debt (excluding debt issued by NAMA
>to fund asset transfers from the banks) will rise to 99% of
>GDP at end-2010 from the 78% previously predicted by the
>government. This increase is explained by the issuance of
>promissory notes to re-capitalise Anglo Irish Bank and Irish
>Nationwide Building Society in 2010 and by a downward revision
>to the estimated level of nominal GDP for 2010. While the
>promissory notes have an immediate full impact on the stock of
>gross debt, their funding cost is spread over a 10-15 year
>period. Net government debt that takes into account the
>government's cash buffer and the assets of the NPRF is
>forecast to be around 76% of GDP by year-end (90% excluding
>NPRF assets). Moreover, though the cost of bank
>recapitalisation is much greater than anticipated, the
>estimated cost of transferring assets to NAMA has consequently
>fallen to EUR31bn from EUR54bn.
>NAMA debt is not formally counted as part of government debt
>(though it is guaranteed by the state). However, it does
>represent a significant contingent liability. Fitch believes
>it is reasonable to assume that NAMA will over the long-term
>break-even given the average 58% discount that has been
>applied to transferred assets compared with an original
>forecast of around 30%.
>
>The broad general government deficit for 2010 will be
>equivalent to an unprecedented 32% of GDP. However, in large
>part this reflects a ruling by the European statistical
>agency, Eurostat, that the issue of promissory notes by the
>government to the banks should be treated as 'above the line'
>budgetary expenditure. Fitch believes stripping out these
>one-off transactions provides a more appropriate measure of
>the underlying fiscal position which is now forecast to be a
>deficit of 11.9% of GDP, close to the initial government
>forecast for 2010.
>
>A key element of strengthening confidence in the
>sustainability of public finances over the medium-term will be
>the announcement in early November of a 'four year profile'
>(2011 to 2014) for the budget including details of the
>adjustment necessary in terms of tax revenue as well as public
>expenditure.
>Broad-based political support would help strengthen the
>credibility of the medium-term fiscal consolidation effort.
>
>The timing and strength of economic recovery is also critical
>to firmly placing public finances on a sustainable path. A
>rebalancing of the economy is underway.
>Ireland is regaining its international competitiveness lost
>during the 'boom'
>years and the current account of the balance of payments is
>expected to move to balance during 2011. Moreover, the drag on
>growth from the collapse of the construction boom has mostly
>run its course. Nevertheless, the ongoing distress in the
>housing and commercial real estate markets, household sector
>de-leveraging and the uncertainty over the global economic
>outlook, especially important given Ireland's open and
>internationally orientated economy, weigh on growth prospects
>and fiscal outlook.
 

jimbo99

Well-known member
Joined
Jul 2, 2009
Messages
574
No doubt FF and ministry of finance will blame RTE and Miriam for daring to ask difficult questions. How dare these unpatriotic economic illiterates speak against the dictatorship, can they not see they are upsetting our new masters the bondholders.
Personally I say burn the bondholders.
 

He3

Moderator
Joined
Oct 1, 2008
Messages
17,094
Ireland will have to bleed for a decade.

Daniel Gros, Brussels Centre for Policy Studies, 28.09.10 Prime Time

Clearly the guarantee was a mistake.

Any govt official with a modicum of sense must have known there was a property bubble, and when it burst there would be massive effect on the banks.

Ireland will have to bleed for a decade.


Life's a fitch.
 

Glucose

Well-known member
Joined
Mar 31, 2010
Messages
851
If Ursula hadn't asked that Question in the Ardilaun hotel in Galway?

......................It's all TV3's fault.

.............Eoghan roar at them again.
 

civilservant

Member
Joined
May 21, 2007
Messages
70
>NAMA debt is not formally counted as part of government debt
>(though it is guaranteed by the state). However, it does
>represent a significant contingent liability. Fitch believes
>it is reasonable to assume that NAMA will over the long-term
>break-even given the average 58% discount that has been
>applied to transferred assets compared with an original
>forecast of around 30%.
I find this a worrying assumption, given the Daft report analysis yesterday which suggested land values have already fallen 75%
 

jimbo99

Well-known member
Joined
Jul 2, 2009
Messages
574
Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--
 

DCon

Well-known member
Joined
May 5, 2009
Messages
5,901
Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--
And credit unions are a "worry".

DUBLIN, Oct 6 (Reuters) - Ireland's credit unions are systemically underprovisioning against loan losses, the financial regulator warned on Wednesday.

"We are finding systemically ... underprovisioning in the credit union sector," Matthew Elderfield told a parliamentary committee. "That's a worry to me."

Elderfield said that the regulator had discovered credit unions were underprovisioning by 40 percent and he intended on dealing with this problem.
Irish credit unions "a worry" - regulator 00:28 Hours ago
 

Cassandra Syndrome

Well-known member
Joined
Aug 23, 2009
Messages
16,908
Junk Status here we come Fitchez......

No doubt the NAMAtrons will be along to say that this is broadly in line with the adjustment and 4 year plan for recovery.
 

DCon

Well-known member
Joined
May 5, 2009
Messages
5,901
Loks like Fitch were right, even Mr Elderfield isn't sure that loss on banks will stop at 34,000,000,000.
Blast I forgot that Big Brother Bond Holder is listening. Hope we don't hit A--
But but but

The Central Bank has, therefore, determined and advised the Bank that in the
central - or expected loss case - an additional €6.4bn in total capital will be
needed for the Recovery Bank and Funding Bank structure to continue to meet
the minimum capital requirements in the coming years consistent with Basel
rules.
A total of €22.9bn has already been provided by the State since the bank was
nationalised early in 2009. This additional capital requirement brings the
projected total gross cost of the restructuring of Anglo Irish Bank to €29.3bn.

This additional capital will be provided by increasing the Promissory Note issued
by the State and by appropriate burden-sharing exclusively by holders of Anglo
subordinated debt instruments as outlined below.
http://www.nama.ie/Publications/2010/MinistersStatementOnBanking30Sept2010.pdf
 

HarshBuzz

Well-known member
Joined
Feb 28, 2008
Messages
11,935
Daniel Gros, Brussels Centre for Policy Studies, 28.09.10 Prime Time

Clearly the guarantee was a mistake.

Any govt official with a modicum of sense must have known there was a property bubble, and when it burst there would be massive effect on the banks.

Ireland will have to bleed for a decade.

Life's a fitch.
I think I see the problem here
 

Cassandra Syndrome

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Joined
Aug 23, 2009
Messages
16,908
I suppose poor wee scary Mary thinks A+ means between 95 and 100% and is wondering why are people gloomy over this.
 

grafter1

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Joined
Apr 1, 2010
Messages
829
Trying to find comments online from Irish politicians in relation to this but no joy.

The fact that they're keeping us on negative watch speaks volumes.

Moodys will have to follow this as they have us 2 notches above Fitch and 1 above S&P
 

evercloserunion

Well-known member
Joined
Dec 10, 2006
Messages
819
Back when we were downgraded to AA- we were told that there would likely be no further downgrades, proving that things are worse now than we thought in Novermber of last year thet they would be by now. That is to say, something is not goig according to plan.
 

evercloserunion

Well-known member
Joined
Dec 10, 2006
Messages
819
More specificlly, here is what Fitch said when they downgraded us to AA- last year:

Fitch does not expect Ireland’s credit profile to deteriorate significantly further
from this rating level, as reflected in the Stable Outlook
. The agency
anticipates that the government measures, backstopped by ECB liquidity
support, will be successful in stabilising and rehabilitating the banking sector.
Furthermore, Fitch expects the government will rein in its deficit sufficiently to
stabilise the debt/GDP ratio and that Ireland will see a return to growth from
2011. The rating is robust to some economic and/or fiscal disappointments
relative to current expectations.
http://www.ntma.ie/Publications/2009/fitchRatings_November2009.pdf
 

DCon

Well-known member
Joined
May 5, 2009
Messages
5,901
I suppose poor wee scary Mary thinks A+ means between 95 and 100% and is wondering why are people gloomy over this.
"A+. Get it right up you, you fu*#in' fu*#er.

What'll Kenny and Gilmore say about this? Ireland top of the class. FF showing the fu*#in way, with yours fu*#in truly running the show.

Wait till I get that sexy ba$**** BIFFO up to the Mansion House"
 

Rockflake

New member
Joined
Sep 17, 2009
Messages
4
It was inevitable that if one debt-rating agency saw fit to reassess us the others would follow suit and almost as inevitable that their reassessment would bring their rating down in line with the other agencies.
Don't get me wrong. I'm not saying this is in any way positive. This is not a "fundamentals of the Irish economy" speech.
The point is that this is not really new. Were there 100 significant ratings agencies in the world would we beat ourselves up 100 times every time we were downgraded. Given our penchant for self flagellation perhaps that is not a rhetorical question but you get my point.

Rockflake
 

grafter1

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Joined
Apr 1, 2010
Messages
829
It was inevitable that if one debt-rating agency saw fit to reassess us the others would follow suit and almost as inevitable that their reassessment would bring their rating down in line with the other agencies.
Don't get me wrong. I'm not saying this is in any way positive. This is not a "fundamentals of the Irish economy" speech.
The point is that this is not really new. Were there 100 significant ratings agencies in the world would we beat ourselves up 100 times every time we were downgraded. Given our penchant for self flagellation perhaps that is not a rhetorical question but you get my point.

Rockflake
The point is though that pension funds and mutual funds are only allowed invest in equities, bonds etc which are rated at a certain level.

The number of potential investors in Irish bonds is sinking based on these downgrades alone.

This downgrade will more than likely be followed by Moodys in the next couple of weeks.

Its hard to see us being able to raise funds from the bond markets again to be honest
 

evercloserunion

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Joined
Dec 10, 2006
Messages
819
The point is though that pension funds and mutual funds are only allowed invest in equities, bonds etc which are rated at a certain level.

The number of potential investors in Irish bonds is sinking based on these downgrades alone.

This downgrade will more than likely be followed by Moodys in the next couple of weeks.

Its hard to see us being able to raise funds from the bond markets again to be honest
I'm not entirely certain but I'm fairly sure that even when we were AA- our bonds were fetching worse prices than such a rating would suggest, which is probably what partially drove the downgrade. This will probably push up our yield even further but won't be fatal IMO, it's all a matter of degree.

Good point re the funds only being allowed to invest in certain ratings, but what is that level generally? We are still a couple of downgrades away fom losing A grade status.
 
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