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Fiat ratings cut to junk status by Moody's

NEW YORK, Dec 23 (Reuters) - Moody's Investors Service on Monday cut Fiat's debt ratings to junk status, affecting about $15 billion of debt, saying Italy's largest automaker suffers from weak operating performance and a high debt load.

The credit rating agency cut Fiat's senior unsecured debt ratings one notch to "Ba1," its highest junk grade, from "Baa3," and its short-term debt ratings to "Not Prime" from "Prime-3." It said its outlook is "negative," meaning another cut is more likely than an upgrade. Fiat is based in Turin.

Moody's said Fiat is unlikely to warrant an investment-grade rating even if it disposes its remaining 80 percent stake in cash-burning Fiat Auto to General Motors Corp. by early 2004. Fiat said on Friday it sold its nearly 6 percent stake in GM, which it swapped for 20 percent of Fiat Auto in 2000, for $1.16 billion.

Earlier on Monday, analyst Virginie Casin of Standard & Poor's said that rating agency should decide whether to cut Fiat to junk status by the end of January. A downgrade should boost the automaker's borrowing costs and would force investors not permitted to own junk-rated debt to sell.