S&P cuts Renault rating into junk territory

NEW YORK, June 19 (Reuters) - Standard & Poor's on Friday cut its ratings on Renault (RENA.PA: Quote, Profile, Research) into junk territory, saying the French automaker's profitability will be hurt by low European auto demand in 2010.

S&P cut Renault's long-term rating two steps to BB, two steps below investment grade, from BBB-minus. The outlook is stable, indicating an additional rating change is not anticipated over the next one to two years.

"Auto demand is likely to remain very low in Europe in 2010, due to the weak economic environment and the payback effect of the incentive schemes that several European countries have adopted to date in 2009," S&P said in a statement.

Renault's financial profile is also likely to continue to weaken as a result of weak auto demand and the large increase in debt the company took on in 2008, S&P said.

Rating downgrades into junk territory can significantly increase a company's borrowing costs. (Reporting by Karen Brettell; Editing by James Dalgleish)