Credit Quality Worsens in Poland, Eastern Europe, Moody's Says

By John Glover

July 28 (Bloomberg) -- Companies in eastern Europe had more credit rating downgrades than upgrades for the first time in a year last quarter as damage from the financial crisis triggered by U.S. mortgages spread worldwide, Moody's Investors Service said.

Moody's cut four companies including Zlomrex SA, Poland's largest supplier of scrap metal, and Kremikovtzi AD, Bulgaria's biggest steel mill, according to ratings changes listed on Bloomberg. Three companies were raised, including Moscow-based lender ZAO Promsvyazbank and AKIB UkrSibbank, the Ukraine unit of BNP Paribas SA.

Credit quality in eastern Europe is likely to deteriorate further as inflation puts pressure on central banks to increase interest rates, making it harder for companies to repay their debt, Moody's said. Western European credit ratings turned negative in the third quarter of last year and 173 companies were downgraded between April and June, more than triple the number raised, Moody's data on Bloomberg show.

``Eastern European borrowers in some sectors are starting to feel the impact of the credit crunch and slowing growth,'' said Ruth Stroppiana, chief international economist at Moody's Economy.com unit. ``However, credit quality remains in better shape than in western Europe.''

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net