DBRS cautious over Portugal's CGD recapitalization plans

August 25, 2016 1:34 PM EDT

A tram is seen in downtown Lisbon September 3, 2013. REUTERS/Rafael Marchante (PORTUGAL - Tags: SOCIETY TRANSPORT CITYSCAPE)

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(Reuters) - Credit rating agency DBRS said on Thursday it was difficult to assess the impact on Portugal's government rating from the plan to recapitalize state-owned bank CGD until it was clear whether investors would buy new debt the plan hinges on.

DBRS's view is key because its BBB low rating for Portugal is currently the only one high enough to keep Portugal's sovereign bonds in the European Central Bank's 1.5 trillion euro buying programme.

"The finance ministry's proposal to recapitalize CGD is an important demonstration of the effort to clean up the banking system. However ... it will be important to gauge the level of investor appetite for the 1 billion euros in subordinated debt that CGD intends to raise. Until we know this, it will be hard to assess the impact on the public sector balance sheet," said the firm's head of sovereign ratings Fergus McCormick.

(Reporting by Marc Jones; Editing by Andrew Heavens)

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