Emerging markets rating agency Capital Intelligence has downgraded the long- and short-term foreign currency ratings of Bahrain International Bank (BIB) to BB- and B respectively. The ratings were also placed on a negative outlook. BIB was downgraded previously to BB long-term and B short-term in June 2002.
The agency commented that the downgrade reflected continued difficulties involving liquidity, capital and earnings. BIB recently announced that it was liquidating its entire US and European corporate bond portfolio in order to ease its tight liquidity position.
This action is likely to result in a loss of between $70-$80 million from the sale. The net cash proceeds from the bond sales will amount to around $58 million, after repaying all related repurchase facilities, and will be used to support current liquidity needs and assist the Bank in upcoming negotiations with lenders to refinance existing debt.
The board is proposing other asset sales in order to meet ongoing needs and the bank will re-evaluate its private equity portfolio. Following the sales of the bond portfolio, the bank plans to have a rights issue.
BIB recorded a large loss in 2001 due to the effects of the downturn in global markets, reduced investment banking activities, heavy provisioning and accounting changes. Results highlighted BIB’s vulnerability to earnings fluctuations due to the fact that it relies on the realization of longer-term illiquid investments. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
