Moody's has lowered the credit ratings of Spanish utilities Iberdrola, Enagas and Red Electrica de España, saying the moves were prompted by this week's downgrade of Spain's sovereign debt.
In a statement, Moody's said it was cutting the credit ratings of power generator Iberdrola and its British subsidiary, Scottish Power, by one notch each to Baa1 and placing them on review for further downgrade.
Enagas, which owns and operates Spain's natural gas grid; and Red Electrica de España, operator of the country's power transmission network, had their credit ratings slashed three notches from A2 to Baa2 and were also placed on review for further downgrade.
Moody's said in a statement that Friday's actions "follow the weakening of the Spanish government's creditworthiness, as captured by Moody's downgrade of Spain's government bond ratings" by three notches to Baa3, or one notch above junk status, on Wednesday.
"Given the multiple channels of contagion that exist between sovereign and corporate issuers, it is challenging for even strong utilities with defensive characteristics to achieve a rating of more than one or two notches higher than the sovereign rating in the country where they are domiciled," Moody's said.
The credit ratings agency justified the sovereign downgrade by saying an impending euro zone loan of up to 100 billion euros ($126 billion) to rescue ailing Spanish banks will further increase the country's debt burden and pointing to the Iberian nation's "very limited financial market access" and continued economic weakness.
On Friday, Spain's central bank said the combined debt of the country's central, regional and local governments climbed in the first quarter to a new record of 72.1 percent of gross domestic product, or double the level of 35 percent of GDP in the first quarter of 2008, prior to the onset of the global recession.
Spain's government is facing a sharp drop in tax revenues amid a double-dip recession and a sky-high unemployment rate of nearly 25 percent, while the yield on Spain's benchmark 10-year bond soared this week to a euro-era record.
The 2008 global financial meltdown came as Spain was struggling with the collapse of the country's 1995-2007 real estate boom, which has left banks saddled with toxic property assets.
Nearly half of Spaniards under 25 are jobless and tens of thousands of families have been evicted from their homes after falling behind on their mortgages. EFE