Moody's drops outlook for Southern and Yorkshire and warns of risk in debt costs

Ratings agency Moody's has downgraded its outlook for Southern Water and Yorkshire Water and sounded a warning for companies with high cost, long term debt. Meanwhile Moody's affirmed its medium risk rating at Baa2 as well as a similar rating for both companies' debt.

Moody's said high gearing at Sothern and Yorkshire at or around 80% of regulatory capital value left both firms at particularly high risk of becoming adrift from the regulator's allowances on cost of debt. And the agency warned that companies like Southern and Yorkshire with high-cost, long-term debt faced elevated risk from erosion of allowed returns by in a low-yield market with prolonged low interest rates.