PSA Bank Rating Cut to Junk-Bond Level

Moody's Investors Service has lowered its rating for PSA Peugeot Citroen's finance arm by one notch to Ba1, one step below investment grade.

Moody's says PSA Banque Finance can't avoid the financial crunch facing its carmaker parent because of Europe's slumping car market. The action follows Moody's downgrade of PSA debt last week by one notch to B1, four rungs below investment grade.

Standard & Poor's Ratings Services downgraded PSA Banque to junk bond status in February.

The French government agreed last year to guarantee as much as €7 billion in loans to the bank. The finance unit was trying to avoid a junk bond rating, which would impair its ability to keep making loans to PSA customers and dealers.