Bad day for Portugal. S&P has cut to junk the credit ratings of four state-owned utilities, saying the country’s sovereign debt troubles could limit the timeliness or sufficiency of help on offer from the government:
Government support for distressed state-owned companies was “increasingly constrained by difficult financial conditions”. This was also reflected in the “weak access” of Portuguese banks to external funding, S&P said.
According to the central bank, Portuguese banks have not succeeded in making any international debt issues since April 2010. S&P said it also believed Lisbon had “in some instances, prioritised its own access to the market before” state companies.
The good news is that Portugal has managed to access the debt markets this year, albeit at rising yields, allotting less than the hoped for. The bad news is that €9.3bn existing loans from the market are due to run out in the first half of this year: €4.5bn in April and €4.95bn in June. Couple that with a €20bn central government financing requirement for 2011, and you can see why Lisbon might need to prioritise its own access before that of its utilities.