MOODY'S CONFIRMS A2/Prime-1 DEPOSIT AND C FINANCIAL STRENGTH RATINGS OF BACOB BANK S.C. BUT MAINTAINS NEGATIVE RATING OUTLOOK
London, 06-26-98 -- Moody's Investors Service confirms the A2/Prime-1 long- and short-term deposit, C financial strength and A2 counterparty ratings of BACOB Bank S.C.. The ratings of the subsidiaries guaranteed by BACOB Bank were also confirmed. These rating actions conclude a review for possible downgrade initiated in January 1998, following the announcement of a large-scale restructuring of the BACOB Group. The review was prompted by Moody's concerns that the planned breakup of the BACOB Group into various component parts could have negative rating implications for the head bank, BACOB Bank (to be renamed ARTESIA Banking Corporation).
Moody's said that BACOB Bank and the Paribas Group have reached an agreement to speed up the completion of the sale of ARTESIA Bank (formerly Banque Paribas Belgique) whereby BACOB Bank will purchase an additional 30% of ARTESIA Bank in the first half of 1999. BACOB Bank will then merge with ARTESIA Bank to form ARTESIA Banking Corporation. The third stage of the group's reorganization envisions the creation of a new retail banking subsidiary bearing the name BACOB Bank. Commenting on the BACOB Group's future organization, Moody's noted that, while significantly different from the present, the BACOB Group's new structure does not affect its overall creditworthiness.
In maintaining the negative rating outlook, Moody's said that the current dynamics of the Belgian banking sector continue to impact negatively the BACOB Group's business and financial fundamentals. The rating agency remarked that, despite its stable franchise, the BACOB Group is being somewhat marginalized as a result of the consolidation process ongoing in the Belgian market. In addition, core profitability remains comparatively modest and Belgium's price-competitive environment offers few opportunities for significant revenue upside over the medium-term. Finally, the BACOB Group still needs to generate the benefits expected from acquisition of ARTESIA Bank, notably in terms of earning sources diversification and efficiency improvements.
The following ratings were confirmed:
BACOB Bank S.C. – long-term bank deposits at A2, short-term deposits at Prime-1, bank financial strength at C, junior subordinated debt at Baa1 and counterparty rating at A2;
BACOB Delaware Inc. – commercial paper guaranteed by BACOB Bank at Prime-1;
BACOB Finance N.V. – subordinated debt guaranteed by BACOB Bank at A3; and
BACOB Overseas Ltd. – senior debt at A2 and subordinated debt at A3, both guaranteed by BACOB Bank.
BACOB Bank S.C., headquartered in Brussels, had consolidated assets of BEF2,634 billion (approximately US$71 billion) at end-December 1997.
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