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VW rating safe, for now, says S&P

Friday, January 13, 2017 12:09
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Volkswagen (OTCMKTS:VLKAY) had something of a reprieve on Friday when ratings agency Standard & Poor’s issued a note stating the German car maker’s status and outlook will not be immediately affected by its $4.3bn US fines this week.

The rating stays at BBB plus but the outlook remains at Negative – meaning that at the next review in 2017 it could be downgraded.

“The company has indicated that it expects to increase its existing provisions of €18.2bn in its 2016 financial statements, although it has not yet announced any figures. Our forecasts indicate that the company can accommodate several billion euros in additional provisions, if needed, at the current rating level,” S&P said.

“Nevertheless, legal risks remain. VW had €3.7bn of contingent liabilities in its last financial statements (to Sept. 30, 2016) to cover the possibility of investor lawsuits. Furthermore, we continue to regard VW’s management and governance framework as a relative weakness,” the note added.

VW ADRs in New York were down 0.8% at $32.10 on Friday.

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