Renault’s Debt Rating Is Lowered to Junk

Renault SA, France’s second-biggest carmaker, had its credit rating cut to junk status by Moody’s Investor’s Service, which cited “significantly worse operating performance and negative free cash flow" in 2008.

The long-term rating was reduced to Ba1, the first grade into junk, from Baa2, the second-lowest investment level, the credit reporting company said today in a statement. Moody’s gave Renault a “stable" outlook, indicating it’s not likely to change the rating soon.

Auto markets “will remain challenging in 2009, with significant drops in volume expected," and a “limited prospect of a meaningful recovery in 2010," Falk Frey, a Frankfurt-based analyst for Moody’s, said in the statement. European governments’ moves to encourage consumers to buy new cars by scrapping older models may “cushion the shock."