Standard & Poor's Ratings Services said on Tuesday that it revised its outlook on 100% state-owned Croatian Bank for Reconstruction and Development (HBOR) to negative from stable. At the same time, the agency affirmed the long- and short-term issuer credit ratings at 'BB+/B'.
On Friday S&P revised its outlook on the Republic of Croatia to negative from stable and affirmed the long- and short-term 'BB+/B' sovereign credit ratings.
"The ratings on HBOR are equalized with the sovereign credit ratings on Croatia. This reflects our view of an "almost certain" likelihood of the government providing timely extraordinary support sufficient to service all debts, should the need arise in any severe downside scenario. Our assessment of the likelihood of extraordinary support is based on our view of HBOR's "critical" role as a main operator of the government's economic, social, and political policy--namely the sustainable development of the Croatian economy and the promotion of exports--and its "integral" role with the government through direct state ownership, ongoing financial support, and unconditional guarantees," S&P said in a statement.
"The negative outlook on HBOR reflects the outlook on Croatia. We could lower the ratings or revise the outlook on HBOR if we lowered the sovereign ratings on Croatia or revised its outlook. We could also lower the ratings on HBOR if we revised our view of HBOR role in the government, or the link between HBOR and the government, which would affect our view of the likelihood of sufficient and timely extraordinary support, in case of financial distress," the agency said.
