TOKYO, Oct 7 (Reuters) - Moody’s Investors Service said on Friday it would likely view any agreement forced on lenders to waive part of Tokyo Electric Power’s (Tepco) debt a default that would prompt it to cut the utility’s credit rating by several notches.
The credit agency agreed with most recommendations on cost cutting at the power company in the wake of the disaster at its nuclear plant in Fukushima, but not with the possibility that banks may be asked to forgive some loans, it said in a report.
A government panel reviewing restructuring efforts at the utility, commonly known as Tepco, recommended this month cost cuts of 2.5 trillion yen ($33 billion) over a decade and left open the possibility that the company may seek more cooperation from lenders.
Tepco must submit a business plan by the end of October, which the government will review before it releases funding to help pay compensation to residents and businesses forced to evacuate from around the Fukushima plant.
The cost of that, a nuclear contamination clean-up and other expenses may leave the utility in need of more than $110 billion of funding, the government panel estimated.
To lessen the burden on taxpayers the utility has come under pressure to ask banks to waive a portion of their loans.
Sumitomo Mitsui Financial Group , Mitsubishi UFJ Financial Group and Mizuho Financial Group , were among lenders that provided about 2 trillion yen ($26 billion) in emergency loans to Tepco in the immediate aftermath of the nuclear meltdown.
Japan’s Trade Minister Yukio Edano, who has the power to reject or approve Tepco’s business plan, last month suggested banks be do more to buttress Tepco’s finances.
Moody’s cut Tepco’s credit rating to junk status in June lowering its senior secured credit rating to Ba2 from Baa2 and its long-term rating to B1 from Baa3. In its report on Friday the agency said it continues to have a negative outlook on the utility.
$1 = 76.700 Japanese Yen Reporting by Tim Kelly; Editing by Edwina Gibbs