Moody’s downgrades Volkswagen, debt

Moody's Investors Service said it downgraded Volkswagen AG’s and its guaranteed rated subsidiaries’ long-term senior unsecured ratings to A3/provisional A3 from A2/provisional A2 and commercial paper and other short-term ratings to Prime-2/provisional Prime-2 from Prime-1/provisional Prime-1.

Concurrently, the agency downgraded the junior subordinate rating assigned to the undated euro-denominated subordinated notes issued by Volkswagen International Finance NV and guaranteed by Volkswagen to Baa2 from Baa1.

The outlook on all ratings is negative.

"Today's downgrade reflects mounting risks to Volkswagen's reputation and future earnings following its announcement on 3 November regarding irregularities in CO2 and fuel consumption levels for certain Volkswagen group vehicles, as well as fresh allegations from the U.S. EPA on 2 November that defeat devices were also installed in certain Audi, Porsche and Volkswagen Touareg models in the U.S.," Yasmina Serghini, Moody's senior credit officer and lead analyst for Volkswagen, said in a news release.

"These new claims pose further challenges to Volkswagen's financial flexibility and competitive position, and heighten Moody's concerns about Volkswagen's internal control and governance issues, thus further weakening its rating profile."

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