MOODY'S TRANSFERS A2/P-1/C RATINGS FROM BELGIUM'S BACOB BANK TO ARTESIA BANKING CORPORATION, FOLLOWING THE COMPLETION OF THE RESTRUCTURING OF THE ARTESIA-BACOB GROUP
Moody's Investors Service assigned A2/P-1/C ratings to Artesia Banking Corporation and withdrew the similar ratings from BACOB Bank s.c.. These rating actions, which amount to a transfer of the ratings from BACOB to Artesia, follow the completion of a large-scale restructuring of the Artesia/BACOB Group, whereby Artesia has become the lead bank and main refinancing vehicle for the Artesia/BACOB Group.
Moody's said that BACOB Bank (old) has transferred all its banking activities to Artesia, and will be eventually merged with its main shareholder, Arcofin s.c., a cooperative holding company of the ARCO group, which is an organization associated with the Belgian Christian Workers' Movement. The group's retail and social-profit activities will be housed into a new company to be named (new) BACOB Bank s.c.. In addition, Arcofin has transferred to Artesia its majority ownership in the insurance company Les Assurances Populaires/DVV. After the restructuring, Artesia will focus on wholesale banking and treasury activities, in addition to being the parent company for various affiliates, including the new BACOB Bank s.c. - the cooperative retail bank - and Les Assurances Populaires/DVV.
This restructuring, added the rating agency, has not altered the underlying credit fundamentals of the group. Artesia's ratings are underpinned by (1) the cooperative bank's good and stable retail franchise as an affinity bank, (2) sound asset quality and low risk profile of its wholesale activities, and (3) Arco Group's strong commitment toward its subsidiary as well as the relatively easy access to capital provided by the cooperative structure. Moody's also noted the added flexibility for making alliances resulting from the group's new legal structure, and that the consolidation of Les Assurances Populaires/DVV will allow the bank to capture a larger share of disintermediated savings in Belgium.
In maintaining the negative rating outlook, Moody's said that the current dynamics of the Belgian banking sector continue to impact negatively the Artesia Group's business and financial fundamentals. Artesia Group's profitability remains comparatively modest and Belgium's price-competitive environment offers few opportunities for significant revenue upside over the medium-term. Artesia Group still needs to generate the benefits expected from its reorganization, and achieve significant gains in efficiency.
The following ratings were assigned:
Artesia banking Corporation N.V. - long-term bank deposits at A2, short-term deposits at Prime-1, bank financial strength at C, junior subordinated debt at Baa1 and issuer rating at A2.
The following ratings were withdrawn:
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 issuer rating at A2.
The following ratings were confirmed:
Artesia Delaware Inc. - commercial paper guaranteed by Artesia BC at Prime-1;
BACOB Finance N.V. - subordinated debt guaranteed by Artesia BC at A3;
Artesia Overseas Ltd. - senior debt at A2 and subordinated debt at A3, both guaranteed by Artesia BC.
Artesia Banking Corporation, headquartered in Brussels, had consolidated assets of EUR64.6 billion (BEF2,6 trillion; approximately US$67 billion) at end-December 1998.
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