Slovenia pulls bond auction after Moody's downgrade

Slovenia called off on Tuesday a bond action after the troubled eurozone country, seen as next in line for a bailout, was downgraded two notches by Moody's to "junk" status.

The finance ministry said that the sale of around $3 billion (2.2 billion euros) in five and 10-year dollar-denominated bond had been "delayed to a likely credit rating move."

The downgrade was later confirmed as being by Moody's, which cut its rating because of the former Yugoslav republic's banks and a deterioration in its public finances.

Slovenia's sovereign debt rating was cut to "Ba1" from "Baa2", placing it in the speculative category. Moody's said that uncertain funding prospects had heightened "the probability that external assistance will be needed."

Financial daily Finance had reported on its website demand in early afternoon had already exceeded two times supply at the auction.

Huge volumes of toxic loans at Slovenian banks' balance sheets, a recession and a yawning public deficit have sparked fears that Ljubljana might soon need outside help.

Nevertheless the former Yugoslav republic raised a better-than-expected 1.1 billion euros ($1.4 billion) through a sale of treasury bills earlier this month.

The centre-left government of Prime Minister Alenka Bratusek, appointed only in March, is currently working on an action plan to be presented to the European Commission on May 9.