MANAMA (Reuters) – Ratings agency Moody’s downgraded Bahrain-based Investcorp INVB.BH on Tuesday, citing the fragility of its financial condition and the tough environment for private equity deals to generate income.
Moody’s said in a statement it had downgraded the long-term deposit rating of the Bahrain- and London-listed investment house to Ba2 from Ba1, its financial strength rating to D from D+ and assigned a negative outlook to the ratings.
It said Investcorp’s financial strength was limited by modest equity levels compared with its risk assets, a high concentration of its private equity investments and little prospects for the company to improve its earnings from fee-generating private equity transactions.
“Although current capital ratios would be consistent with a rating at the upper end of the Ba category under normal operating circumstances, they are currently vulnerable to further mark-to-market losses on its investments, without relief from predictable earning streams,” said George Chrysaphinis, a vice president and senior analyst at Moody’s.
The agency said the downgrade took into consideration both Investcorp’s recent capital hike through the placement of $500 million in preferential shares and the $269 million net loss it posted for the six months ended June 30.
Investcorp posted a full-year loss of $781 million in its 2008-09 year, after its portfolio companies were hit by the global financial turmoil.
(Reporting by Frederik Richter; Editing by Rupert Winchester )