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Moody's changes MÁV's rating outlook to negative

Moody's Investors Service has today changed to negative the outlook on the Ba2 Corporate Family Rating (CFR) and Probability of Default Rating (PDR) of MÁV Zrt Hungarian State Railways (MÁV).

The rating action follows Moody's decision on 23 July 2010 to place the Baa1 local and foreign currency ratings of the Republic of Hungary on review for possible downgrade.

The negative outlook on MÁV's ratings reflects Moody's view that the government might be more constrained in its level of support going forward at time when MÁV's liquidity remains under pressure due to the sizeable debt repayments due in 2011 (as outlined in Moody's last press release on MÁV dated 28 June 2010).

The outlook could be stabilized if the pressure on the sovereign rating is removed (i.e. upon the confirmation of the existing Baa1 rating) and the concerns on the company's liquidity profile and refinancing risk subside. Although a multi-notch downgrade on the government ratings is unlikely, in such event there might be immediate pressure on MÁV's rating as well. (BBJ)