Ratings agency Moody’s caused a stir in April 2013 by downgrading the sovereign rating on Slovenia two notches, to non-investment grade Ba1. This move did not prevent the Slovenian government from raising $3.5bn of five- and 10-year bonds just days later, at less than 5% interest rates on the five-year tranche. The combined offering collected orders of more than $16bn, suggesting that investors shrugged off the downgrade and were confident Slovenia could avoid a serious financial crisis.
However, Moody’s analysts had argued that “ongoing turmoil” in the country’s banking sector meant a “high likelihood that the sovereign will be required to provide further assistance and capital injections”, which could even lead to the government needing “external financial assistance”. The government is seeking to create a bank asset management company to relieve the banking sector of its more difficult non-performing loans (NPLs), but progress so far has been slow.
