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More stock market pain for Fiat?

Fiat's restructuring pains were made more acute with the recent downgrade of its debt rating to junk bond status by Moody's Investors Service. And the move may herald further stock market falls. Moody's Investors Service cut Fiat's senior unsecured debt ratings one notch to Ba1, its highest junk grade, on Friday. The long expected move rocked the equity markets and drove Fiat's share price down to the lowest levels for 20 years.

Fiat's bonds were already trading at levels associated with junk ratings prior to the cut, traders said. It's 5.75 per cent euro bond due May 2006 was trading at 85.5 percent of face value early on Monday, having fallen as low as 75 per cent in the wake of the downgrade.

"It is a very, very thin market for obvious reasons and the cut was expected," said a trader at a U.S. bank in London. "But Fiat's fundamentals remain pretty grim and further weakening is a distinct possibility once the market is back next week."

Source: Reuters

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