Fitch on Wednesday downgraded Cyprus one notch to BBB, stating that the country will likely need an EU bailout. The ratings agency expects Cyprus to struggle to meet its financing requirements into 2012.
AFP - Fitch Ratings said on Wednesday Cyprus will probably be unable to meet its financing requirements during the rest of this year and early 2012 and will likely need an EU bailout.
Fitch made the forecast in an announcement that it had downgraded Republic of Cyprus long-term foreign and local currency issuer default ratings to BBB from A-, with the outlook negative on long-term IDRs.
It said financing requirements in the last five months of this year will be close to 1.1 billion euros and another $1.2 billion needed in January and February.
"Under current market conditions, Fitch believes that the government will be unable to meet this target without recourse to external official assistance," while adding that, "at this juncture, Fitch anticipates that such assistance is likely to be forthcoming."
Fitch analyst Chris Pryce confirmed to AFP that what was meant here was assistance from the European Fund for Financial Stability.
"I think it will be a struggle to get through this year," Pryce said, adding that help would almost certainly be needed in early 2012.
Fitch said the government calculates its financing requirements in the last five months of the year will be close to 1.1 billion, of which 650 million will will be existing debt falling due for redemption.
"Against this, the government has 570 million euros of cash balances, representing about half of the total financing requirement. The government anticipates that it will be able to refinance the balance by borrowing from domestic financial institutions, although Fitch considers that this may prove challenging at a time when the banks are facing a decline in asset quality."
Even if funds can be secured through the end of this year, Cyprus "will enter 2012 with minimal cash balances and refinancing needs of 1.2 billion euros in the first two months," Fitch said.
Cyprus has already recently been downgraded by the other two major international ratings agencies -- Standard & Poor's and Moody's.
Date created : 2011-08-10