• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Moody's: GCC corporate ratings unaffected over short term by European banks' retrenchment

Global Credit Research - 19 Mar 2012

London, 19 March 2012 -- Over the short term, the ratings of non-financial corporates in Gulf Co-operation Council (GCC) countries will be mostly unaffected by European banks' gradual withdrawal from the region, says Moody's Investors Service in a new report on this sector. However, Moody's explains that corporates with lower ratings will be most vulnerable to the withdrawal of funding, which will become more costly and conditional overall.

The retrenchment by European banks from the region has been prompted by the ongoing euro area debt crisis and the banks' need to deleverage and build up capital buffers. This has potential implications for GCC banking systems and by extension also for local corporates, which are typically heavily reliant on bank financing and face significant maturity redemptions over the next few years.

Although corporates in the GCC region face sizeable funding requirements, Moody's expects the credit impact on most rated issuers to be limited over the near term. This is because most the 24 Moody's-rated GCC corporates are highly rated government-related issuers (GRIs) that have strengthened their liquidity profiles over recent years and proactively addressed near-term maturities by extending their debt maturity profiles.

Nonetheless, the exposure of rated GCC corporates to European banking institutions is significant, with an estimated 34% share of the total bank lending to Moody's-rated corporates. In Moody's view, a retrenchment of European banks will not lead to an abrupt liquidity shock over the short term; however, a more sustained withdrawal of European banks could generate a longer-term structural funding shortfall. This is likely to further encourage the ongoing trend among rated issuers to diversify their funding sources, including through increased capital market issuance, in both conventional and Islamic forms.

Rated issuers at the low end of Moody's rating scale are the most vulnerable to a potential funding withdrawal as they are heavily reliant on credit lines from banks to meet their day-to-day financing needs, to address significant upcoming maturities and to amend imbalanced capital structures.

Funding will become more costly and come with more strings attached. The potentially most negative factors that we are monitoring are (1) the impact of higher lending costs on cash flows and profitability, and (2) in some cases, the potential for an increase in the prevalence of secured or collateralised forms of lending, which could lead existing unsecured creditors to become subordinated.

The new report, entitled "GCC Corporates Limited Near-Term Rating Impact Expected from European Banks' Retrenchment" is now available on www.moodys.com.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Franck Nowak
Analyst
Corporate Finance Group
Moody's Investors Services Limited, Dubai Branch
Gate Precinct 3, Level 3
P.O. Box 506845
DIFC - Dubai
UAE
Telephone: 00971 4237 9536

David G. Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536

Releasing Office:
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London E14 5FA
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: GCC corporate ratings unaffected over short term by European banks' retrenchment
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


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© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
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