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Warning: the contents of this issue may be downgraded

The lead managers on Municipality Finance’s debut euro benchmark this week felt the need to remind investors that the issuer’s sovereign faces a ratings review on Friday. Are we entering a new era of banking health and safety gone mad?

No-one can blame MuniFin’s leads — Barclays, Danske Bank, JP Morgan and Société Générale — for including the warning in the deal’s marketing material.

Even though MuniFin is not explicitly guaranteed by the Finnish sovereign, the last thing they would want is for Standard & Poor’s to cut Finland’s rating on Friday (it has Finland at AA+ with negative outlook) and for there to be a knock-on effect on MuniFin, after its deal is priced but before it settles.

Such problems have happened before. In January, Poland priced a dual tranche bond, then, before settlement, S&P cut its rating from A- with a positive outlook to triple BBB+ with a negative outlook.

While the depth of the downgrade was a surprise, that did not stop criticism of the decision to bring a deal with a rating action imminent. One syndicate official away from the deal said the timing was “careless”.

Nobody is expecting such a dramatic cut for Finland on Friday — if there is any cut at all — but it does seem by providing a helpful reminder to investors that a decision is looming, the leads are covering their back.

It’s hard to blame them, but one worries whether the capital markets are embarking on a dangerous — and tedious — path.

While many of these stories have no doubt devolved from the actual truth, nobody wants to see a bond market with parallels of coffee cups with warnings that their contents may be hot or sleeping tablet packets alerting the buyer to the possibility that the contents may cause drowsiness.

Whether or not S&P’s big downgrade of Poland was harsh, rating agencies should never be afraid of assessing issuers as they see fit. We’ve seen all too well what happens if they are too generous.

And nobody can blame banks for covering themselves by including a helpful little reminder to investors that there is a risk — however slight — that the bonds they have just bought might not be rated so highly when they are delivered.

But no investor can have cause for complaint if it has bought bonds in the run-up to a potential rating action and then the paper is hit with a downgrade. The rating calendars should be printed out and stuck on their office walls.

Being a helpful publication, we’ve provided all this year’s upcoming rating reviews for core eurozone sovereign issuers in GlobalCapital’s online SSA pipeline.

Note — we accept no responsibility for rating reviews turning out in a different way to what you expected.

And that’s the worst thing about health and safety going mad — it’s contagious.

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