S&P lowers Arcapita Bank credit ratings
Paris, June 2, 2009
Standard and Poor's Ratings Services has said that it has lowered its long-term counterparty credit ratings on Bahrain-based Arcapita Bank to 'BB-' from 'BB'.
It also removed them from CreditWatch, where they were first placed on January 28 this year, with negative implications, according to a report in our sister newspaper Gulf Daily News.
'At the same time, we affirmed our 'B' short-term rating on Arcapita. The outlook is negative,' the agency said.
'The ratings reflect our opinion of Arcapita's stand-alone credit profile and do not include any uplift for extraordinary external support.
'However, Standard and Poor's recognises that ongoing support from Arcapita's shareholders has been significant and is incorporated in Arcapita's stand-alone credit profile.
'The rating action reflects our opinion of Arcapita's high leverage in the context of a very difficult economic and investment climate, which has challenged Arcapita's business model, reduced the value of its assets, and put pressure on its financial performance,' said S&P credit analyst Mohamed Damak.
Arcapita's financial profile deteriorated significantly last year.
'Financial leverage (as measured by, among other indicators, the ratio of net debt to investment portfolio value or loan-to-value ratio) increased rapidly during last year, as Arcapita made large investments that it was not able to fully place with its customers.'
The outlook can be revised to stable if leverage is materially managed down from current levels, if it demonstrates a commitment to a more predictable and conservative leverage policy, and if it maintains adequate liquidity, S&P said.