In some instances, the ratings of European infrastructure and utility companies could be higher than those of the sovereign country in which they are located, according to Moody's Investors Service in a new report.
Infrastructure companies are likely to be rated at the level of the sovereign rating or up to two rating levels higher, explained analysts in the report.
In the current environment where continued pressure on sovereign ratings has been seen throughout Europe, the financial markets could see that the decline of sovereign ratings have a compression effect on infrastructure company ratings.
"European infrastructure companies could potentially be resilient to the effects of declining sovereign credit quality," said Andrew Blease, a senior vice-president in Moody's infrastructure finance team and author of the report.
Declining sovereign credit quality is often indicative of stress in the local economy and is likely to result in domestic banking system problems and disruptions in capital markets.
However, the relative credit quality of infrastructure companies might suggest ratings higher than the sovereign.