30/11/2012: Moody's downgrade ESM and EFSF

Moody's downgrade of ESM and EFSF: here.

The downgrade was driven by two factors:

1. Moody's downgrade of France - the second largest provider of callable capital in the case of the ESM and as a guarantor country in the case of the EFSF.
2. "Moody's view that there is a high correlation in credit risk among the entities' supporters is consistent with the evolution to date of the euro area debt crisis and the close institutional, economic and financial linkages among the major euro area sovereigns. As a result, the credit risks and ratings of the ESM and the EFSF are closely aligned to those of its strongest supporters."

Another point of interest: "Moody's acknowledges that the ESM benefits from credit features that differentiate it from the EFSF, including the preferred creditor status and the paid-in capital of EUR80 billion. However, in Moody's view, these credit features do not enhance the ESM's credit profile to the extent that it would warrant a rating differentiation between the two entities."

Update: here's a good take on some of the issues involved in the downgrade: http://dealbreaker.com/2012/11/efsf-conveniently-downgraded/