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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Barry Freed's picture

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

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.




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.


markmotive's picture

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

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?

machineh's picture

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

SheepleLOVEcheddarbaybiscuits's picture

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

Turd Ferguson's picture

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

What a complete farce. BTFD.


Clam McCain's picture

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


EscapeKey's picture

Enjoy your pennies. Avoid the steamroller.

GeneMarchbanks's picture

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

hugovanderbubble's picture

and FITCH about FRANCE?



SHORT UK FINANCIALS (specially RBS and Lloyds)

gojam's picture

You think Fitch will retaliate ?

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"

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.

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.

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.

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.

orangedrinkandchips's picture




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.


kito's picture

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

youngman's picture

Interesting....so the broke countries that GUARANTEE the EFSF...get the same rating.....wow..that was logical...the first logical thing in this market for a long time....I might sober up today on that news

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?

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.

Mike2756's picture

Another downside resolution to the wedge?

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!

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?

Stoploss's picture

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

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.

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.

Tsar Pointless's picture

Clown car go VROOOOM!

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?



spanish inquisition's picture

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

LongSoupLine's picture



Futures stay green...


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

AngryGerman's picture



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!

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.

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


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.

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.

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.

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.

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.