The news last week that the Japanese government was close to agreeing a bailout plan for Tepco, the electricity company that owns the Fukushima nuclear plant, should have come as a relief for the company and its debt holders.
But the opposite appears to be true. Amid uncertainty over the structure of the bailout and when it might finally be agreed, Moody’s has taken the proactive step of downgrading the company’s debt, saying that the plan as it looks so far actually increases the risk of a default.
The clause that particularly seems to trouble the ratings agency is the one that Tepco will only be insured for compensation payments of up to Y120bn. Anything above that limit will be the company’s liability.