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S&P Puts EFSF's Critical AAA Rating On Downgrade Review, Can Cut By Up To Two Notches

Tyler Durden's picture


Here is the full release.

European Financial Stability Facility Long-Term 'AAA' Rating Placed On CreditWatch Negative


  •     On Dec. 5, 2011, Standard & Poor's placed its ratings on the 'AAA' rated sovereigns which guarantee the financial obligations of the European Financial Stability Facility (EFSF).
  •     As a result, we are also placing the 'AAA' long-term credit rating on EFSF on CreditWatch negative and affirming the 'A-1+' short-term rating.
  •     Depending on the outcome of our review of the ratings on EFSF member governments, we could lower the long-term rating on the EFSF by one or two notches, if any.
  •     The issuer and issue ratings we will assign to EFSF following our CreditWatch review will likely be the same as the lowest issuer rating we assign to the rated EFSF members we currently rate 'AAA', unless there are offsetting credit enhancements in place.

Rating Action

On Dec. 6, 2011, Standard & Poor's Ratings Services placed the 'AAA' long-term credit rating on the European Financial Stability Facility (EFSF) on
CreditWatch with negative implications. At the same time, we affirmed the 'A-1+' short-term credit rating on EFSF.


Our 'AAA' long- and 'A-1+' short-term ratings on EFSF are based on (i) the unconditional, irrevocable, and timely guarantees from EFSF members (guarantor members) rated 'AAA' by Standard & Poor's that support EFSF's obligations (bonds, notes, commercial paper, debt securities, or other financing arrangements) and, (ii) the 'AAA' rated securities that constitute EFSF's liquidity reserves. Standard & Poor's has placed the 'AAA' long-term issue ratings on EFSF's guarantor members Austria, Finland, France, Germany, Luxembourg, and The Netherlands on CreditWatch negative (see "Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications," published on Dec. 5, 2011), indicating our view of their increased credit risks.

A CreditWatch negative placement indicates that, in our opinion, there is at least a one-in-two probability of the rating being lowered in the short term. Based on EFSF's current structure, were we to lower one or more of the current 'AAA' ratings on EFSF's guarantor members, all else being equal, we would lower the issuer and issue ratings on EFSF to the lowest sovereign rating on members currently rated 'AAA'.

In our media releases of Dec. 5, 2011, on the CreditWatch placements of individual 'AAA' rated guarantor members, we indicated that our ratings on Austria, Finland, Germany, Luxembourg, and The Netherlands are currently unlikely to fall by more than one notch, and the ratings on France by no more than two notches, if at all. Accordingly, we currently anticipate that if we lower the rating on EFSF, it could be by up to two notches.


We expect to resolve EFSF's CreditWatch placement within 90 days and, if possible sooner, after we complete the review of EFSF guarantor members currently rated 'AAA'.


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Tue, 12/06/2011 - 09:47 | 1950514 Barry Freed
Barry Freed's picture

I don't see how this can be perceived as anything but extremely bullish.

Tue, 12/06/2011 - 10:06 | 1950564 Oh regional Indian
Oh regional Indian's picture

It's in the name folks. It is actually the finaicial in-stability fund. Of course it's rating is shaky. Downward shaky. Look at who is guaranteeing it.

If you look at subtle moves worldwide, looks like we're setting up for a swift global bankruptcy.

The downgrades are flyign fast and furious now. Even here in India.




Tue, 12/06/2011 - 10:13 | 1950604 Oh regional Indian
Oh regional Indian's picture

Holy Heck, look at Spain. Wow! Thanks Hugo. And look at the complete opposite move in Portugal. That looks veeeeeery interesting.

Spain is the brute, metal, iron, heavy anchor that will drag the EU down. All this is just the chains rattling around, getting ready for the big tug.


Tue, 12/06/2011 - 10:44 | 1950712 markmotive
markmotive's picture

...and the reason why bailing out your own bonds isn't really a guarantee suddenly sinks in...

Tue, 12/06/2011 - 10:19 | 1950632 Hard1
Hard1's picture

What is S&P doing?  We could lower the ratings...or we could affirm them.  They can do that all the time!!! why do they make a press statement about it now?

Tue, 12/06/2011 - 11:07 | 1950783 machineh
machineh's picture

We could affirm the 'AAA' ratings on EFSF, Bob ... BUT IT WOULD BE WRONG, THAT'S FOR SURE!

Tue, 12/06/2011 - 10:16 | 1950619 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

SP: youse guys need to start printing, or were gonna lower your rating, meaning you have to pay more re bonds

Tue, 12/06/2011 - 10:05 | 1950581 Turd Ferguson
Turd Ferguson's picture

No, this is definitely gold bearish. Look at the chart this morning!<sarc>

What a complete farce. BTFD.


Tue, 12/06/2011 - 10:06 | 1950586 Clam McCain
Clam McCain's picture

i just sold my gold to buy stocks - seems the only way to make money these days


Tue, 12/06/2011 - 10:15 | 1950615 EscapeKey
EscapeKey's picture

Enjoy your pennies. Avoid the steamroller.

Tue, 12/06/2011 - 09:48 | 1950519 GeneMarchbanks
GeneMarchbanks's picture

S&P has still not taken a look at the UK. Anybody else find that curious?

Tue, 12/06/2011 - 09:53 | 1950530 hugovanderbubble
hugovanderbubble's picture

and FITCH about FRANCE?



SHORT UK FINANCIALS (specially RBS and Lloyds)

Tue, 12/06/2011 - 09:57 | 1950549 gojam
gojam's picture

You think Fitch will retaliate ?

Tue, 12/06/2011 - 10:02 | 1950570 hugovanderbubble
hugovanderbubble's picture

Fitch is a hidden french company.

THey will lose power with Dagong and European Rating Agency next 2012.

So they will try to crash the markets..." shake the tree"

Tue, 12/06/2011 - 09:58 | 1950551 GeneMarchbanks
GeneMarchbanks's picture

Go to:

Take a look at G10 Debt distribution charts.


Tue, 12/06/2011 - 10:02 | 1950572 tiger7905
tiger7905's picture

Great Ann Barnhardt interview on MF Global

Tue, 12/06/2011 - 10:04 | 1950575 Tommy Gun
Tommy Gun's picture

The rating agencies reckon that the Tories will continue with spending cuts to keep the markets happy and given the British people love a bit of misery and suffering (consider the weather, soccer team and public transport) they'll take it.

Tue, 12/06/2011 - 09:58 | 1950554 pacdm
pacdm's picture

No they just want to force the hand of the 15 countries to give Germany & France all the power over Europe its all one big con job.

Tue, 12/06/2011 - 10:01 | 1950565 Mike2756
Mike2756's picture

They can print.

Tue, 12/06/2011 - 10:17 | 1950621 EscapeKey
EscapeKey's picture

Debt/GDP isn't TOO bad yet, but the deficit is completely out of control, so we'll get there soon enough. Thanks for that one, Brown. Just another of your genius moves as a politician.

Tue, 12/06/2011 - 09:49 | 1950522 Tommy Gun
Tommy Gun's picture

 EFSF is soooo last summit (or was it the one before that?). Looking forward to the next cunning plan from the EZ's Brains Trust.

Tue, 12/06/2011 - 09:52 | 1950526 orangedrinkandchips
orangedrinkandchips's picture




Tue, 12/06/2011 - 09:53 | 1950527 Cult_of_Reason
Cult_of_Reason's picture

This is very bullish. It means ECB will print next week. Another 500 Dow rally.

Any negative news from Europe means ECB will print.


Tue, 12/06/2011 - 09:52 | 1950529 kito
kito's picture

its ok. All problems will be solved by merkozy this week.

Tue, 12/06/2011 - 09:53 | 1950532 youngman
youngman's picture the broke countries that GUARANTEE the EFSF...get the same was logical...the first logical thing in this market for a long time....I might sober up today on that news

Tue, 12/06/2011 - 09:54 | 1950533 MFL8240
MFL8240's picture

Can anyone figure out why gold is down again?  I am so fucking sick of this bullshit. When the US was downgraded gold went up, now with a 1000 point move in equities and phony goverment reports everyone wants equities?

Tue, 12/06/2011 - 09:58 | 1950553 The Count
The Count's picture

What, you think the markets have to do what your 'analysis' implies? If yes, you're better off putting your money into your mattress.

Tue, 12/06/2011 - 10:05 | 1950577 Mike2756
Mike2756's picture

Another downside resolution to the wedge?

Tue, 12/06/2011 - 10:05 | 1950580 The Deleuzian
The Deleuzian's picture

Why complain unless you need to sell today!  Take advantage MFL...Gold is up 20% or so in 2011...If it starts going straight up into the $2000's and beyond...Then worry!

Tue, 12/06/2011 - 10:06 | 1950538 Manthong
Manthong's picture

I thought we had moved past that little EFSF issue and on to better and more substantial asset conjuring voodoo.

Kidding aside, could it be that there exists some infinitesimal fraction of a scintilla of a shred of a possibility that part of the system is legitimate?

Tue, 12/06/2011 - 09:55 | 1950539 Stoploss
Stoploss's picture

They should all be whacked two notches, just for starters.

Tue, 12/06/2011 - 09:55 | 1950540 Cdad
Cdad's picture

It's all going so well.  That Wall Street takes any of this seriously sends a signal of desperation that I never thought I would live to see.

Tue, 12/06/2011 - 10:16 | 1950618 SheepDog-One
SheepDog-One's picture

The sickness of it all tells me whats coming next is worse than even what I imagined it would be. Horrible sudden collapse.

Tue, 12/06/2011 - 09:55 | 1950543 Tsar Pointless
Tsar Pointless's picture

Clown car go VROOOOM!

Tue, 12/06/2011 - 09:56 | 1950544 The Count
The Count's picture

This prooves that the whole ESFM and Eurobond smoke and mirror projects are simply bogus. Who does Merkel and Sarkozy think they are fooling?



Tue, 12/06/2011 - 09:57 | 1950550 spanish inquisition
spanish inquisition's picture

Pretty sure we can eliminate AAA from the ratings system. Go AA+

Tue, 12/06/2011 - 11:31 | 1950853 Mauibrad
Mauibrad's picture

Aussie is a legitimate AAA.

Tue, 12/06/2011 - 09:58 | 1950552 LongSoupLine
LongSoupLine's picture



Futures stay green...


Must...not...let...Wall Street...bonus...rally...die.

Tue, 12/06/2011 - 10:02 | 1950571 AngryGerman
AngryGerman's picture



Tue, 12/06/2011 - 10:01 | 1950563 sabra1
sabra1's picture

i've seen the last page of the oldidorks playbook!


-kill shorts

-everyone long

-crash markets overnight

-internet crashes, blamed on terrorists

-no recourse for lost investments!

Tue, 12/06/2011 - 10:07 | 1950589 SheepDog-One
SheepDog-One's picture

My 401k! Noooooooo!! 'Please proceed to the nearest FEMA center' on the EAS broadcast.

Did everyone hear the news the Gubment doesnt want you to hear about retail sales? Highest increase was firearm sales.

Tue, 12/06/2011 - 10:08 | 1950591 jay28elle
jay28elle's picture

- Obama declares national emergeny

- Elections called off

- Obama picks -n- chooses which of his enemies he wants to classify as terrorists. 

- Terrorists thrown in Gitmo (expanded to accomodate 10's of millions of former Hope'rs and dreamers, moderates, conservatives and libertarians)

- Obama and rest of The Machine take the assets of detainees


Tue, 12/06/2011 - 10:01 | 1950566 lizzy36
lizzy36's picture

I miss October when market went straight up because EFSF was going to be infinity trillion. And we were all going to get a pony.

Tue, 12/06/2011 - 10:05 | 1950582 LongSoupLine
LongSoupLine's picture

uhhh, I got mine.  Damn thing f'ed-up the UPS truck something fierce.  Now it just stands in yard and craps everywhere.

Tue, 12/06/2011 - 10:02 | 1950569 mayhem_korner
mayhem_korner's picture



When are the rating agencies going to distinguish between "credit worthiness" and "ability to manufacturer and circulate fiat"?  Full faith and credit is now full faith and functioning print-button.

Tue, 12/06/2011 - 10:14 | 1950609 SheepDog-One
SheepDog-One's picture

It really is sick, just 3 years ago everyone was dead set against this monetizing every debt out there, now theyre forcing the last holdouts into it or else...psychopaths are in charge.

Tue, 12/06/2011 - 10:07 | 1950579 morisu
morisu's picture

Finnish Finance Minister Jutta Urpilainen just broke out from the independence day's celebrations and crashed the result of next summit already. Finland will not accept switching ESM to be workable with majority instead of requiring unanimous decision making nor the removal of private sector participancy... (source in Finnish).


So here we go again.

Tue, 12/06/2011 - 10:09 | 1950593 AngryGerman
AngryGerman's picture

wasn't she doing porn before? i know that face from somewhere...

Tue, 12/06/2011 - 10:19 | 1950634 AngryGerman
AngryGerman's picture

that's what i meant. now i already have my christmas rally (in my pants)!

Tue, 12/06/2011 - 10:10 | 1950595 Mike2756
Mike2756's picture

That's next years problem.

Tue, 12/06/2011 - 10:06 | 1950584 midgetrannyporn
midgetrannyporn's picture

S&P still doing the banking god's work.

Tue, 12/06/2011 - 10:12 | 1950602 SheepDog-One
SheepDog-One's picture

Just sick elitist games, like cat and mouse.

Tue, 12/06/2011 - 10:19 | 1950633 PaperBear
PaperBear's picture

Should this downgrade happen this would have to be the shortest time any newly created instrument has suffered such an ignominy.

Tue, 12/06/2011 - 10:31 | 1950672 rambler6421
rambler6421's picture

Does this really matter?  The market will figure out these ratings in the long run.

Tue, 12/06/2011 - 10:40 | 1950695 junkyardjack
junkyardjack's picture

This is bullish, equities have been up since the US got downgraded

Tue, 12/06/2011 - 10:48 | 1950720 my puppy for prez
my puppy for prez's picture

Notchez, bitchez!

Tue, 12/06/2011 - 12:37 | 1951129 Snakeeyes
Snakeeyes's picture
Little reaction in Euro bonds. "Timmy the Weasel" sidesteps question on Fed but admits the IMF (a subsidiary of the US Federal Government) will continue to fund European bailout. S&P Places EFSF On CreditWatch Negative – EuroSov Reaction is “Meh.” Geithner Sidesteps The Fed Bailout Question, But Admits to Continuing IMF Bailouts

Tue, 12/06/2011 - 13:15 | 1951263 pineyard
pineyard's picture

IMAGINE :;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Some person  from somewhere OUTSIDE the USA ..10 Years ago . For ex from Europe  had some savings he wanted  to invest ... in a " SAFE HAVEN " .... He was perrsuaded  by many assurances from    " Over the Pond " that the US TREASURIES were what he was looking for .. "SAFE " as they were said to be .He purchased for 100.000 USD , 1o Year US Treasuries . As the exchange -rate 10 years ago was 0.8889 USD to 1 Euro ..He paid 112,498 EURO for  100,000 US Dollar worth of US treasuries .

10 Years went ,during which time he recieved some of the LOWEST interst-rates in the World.. so the COUPON Money wasnt something to write home about .. it did not even compensate for the yearly inflation .. something lige a couple of percent / year .

After 10 Years he received  100,000 US Dollar back . He exchanged it for EURO . Well ..he was a bit dissappointed because hereceived only 74,727 EURO  ... for the 112,498 Euro Investment he 10 years ago went along with ....  because NOW the EUR/USD exchange Rtae was 1.3382 USD to the Euro  Hmmmm !

His neighbour also had invested in Gouvernment Bonds ... but he was a Patriot . He bought German BUNDS or French Bonds or name it whatever european Bond U could think of ( except Greek ofc )

And at maturity he received 100.000 EURO ...  During the Years he had received on average some percent more in interest  / year than his buddy who had invested in US Treasuries. In fact alltogether his capital  was now almost 50 % bigger than the 100.000 he had invested.. Very well he now had 150.000 EURO for his retirement . Nice.. in these uncertain days ..

 He felt a bit sorry for his neighbour who had been scammed by the americans ... so as he was POLITE .. he didnt mention it to his unlycky friend ... but ofc he was not dissatisfied and did not really understand why there was so much talk about the demise of the EURO .. He at least did have NOTHING to complain about .

Tue, 12/06/2011 - 21:43 | 1953371 StychoKiller
StychoKiller's picture

The sum is greater than the parts?  Only if we synergize the banks by right-sizing and thinking outside the box!  What a comedy! :>D

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