International emerging market rating agency Capital Intelligence has downgraded the long- and short-term foreign currency ratings of BMB Investment Bank, the Bahrain incorporated offshore investment bank, to C+ and C respectively with a negative outlook. The agency previously downgraded the bank to B+ and B in May due to tightened liquidity, higher leverage and continued losses.
Capital Intelligence commented that BMB’s funding and liquidity position has deteriorated further over more recent time. Tighter liquidity has occurred within the Bahraini offshore investment banking sector recently due to increased regional tension regarding the possibility of hostilities vis-à-vis Iraq.
Problems at Bahrain International Bank have also added to the negative sentiment. BMB has experienced liquidity outflow in addition to credit lines being cut. The bank needs to re-finance a $75 million medium-term syndicated facility maturing in December 2002. BMB is currently in negotiations with banks regarding the re-financing.
However the success of the re-financing will depend in part on BMB receiving additional funding from other sources as well as shareholder support. On this note, BMB has recently gained approval from its Board for raising capital by $20 million. The Bahrain Monetary Agency continues to provide much-needed support for the bank. The bank believes that the capital raising exercise will help the BMA to finalize the level of liquidity support that they will provide.
Although BMB recorded a profit in the first six months of 2002, following heavy losses in 2000 and 2001, the third quarter of 2002 is expected to be weaker due to the further deterioration in global financial markets during this period. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
