Bloomberg News

Tepco Financial Aid Is Risk for Japan Bank Ratings, S&P Says

June 01, 2011

(Updates with quote in second paragraph.)

June 1 (Bloomberg) -- Japanese banks’ credit ratings are at risk if they forgive loans made to Tokyo Electric Power Co., the operator of a stricken nuclear power plant, Standard & Poor’s said.

In a worst-case scenario, debt waivers combined with deterioration of other loans because of the country’s record earthquake could negatively affect the ratings on some banks, S&P said in a statement today.

S&P this week downgraded Tokyo Electric’s credit ratings to junk status on the risk that banks may restructure some of its debts. Government officials last month urged creditors to assist the utility after Prime Minister Naoto Kan’s administration outlined a support plan that is aimed at helping it compensate victims of the nuclear accident.

Under a “less-stressed” scenario, in which lenders reduce interest rates on existing loans to Tokyo Electric, “credit costs and the immediate impact on the banks’ profitability would be manageable,” S&P said. Banks would still have to classify loans as restructured according to current regulations.

Moody’s Investors Service said last month that it may cut the debt ratings of lenders to Tokyo Electric if they waive loans made before the March 11 quake and tsunami triggered the nuclear crisis. Japanese banks’ debt ratings were also put on review for possible downgrade by Moody’s yesterday as deteriorating public finances may make it harder for the government to help lenders in times of financial trouble.

--Editors: Russell Ward, Linus Chua

To contact the reporter for this story: Kyung Bok Cho at kcho7@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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