Standard & Poor’s Ratings Services lowered its long- and short-term counterparty credit ratings on Marfin Investment Group Holdings S.A. (MIG) to ‘BB/B’ from ‘BBB-/A-3’. At the same time, the long- and short-term ratings were removed from CreditWatch, where they had been placed with developing implications on Jan. 12, 2007. The outlook is negative.
“The rating action reflects Standard & Poor’s assessment of MIG’s substantial change in business and financial profile to a listed investment and holding company making private equity style investments from that of a bank holding company,” said Standard & Poor’s credit analyst Nigel Greenwood.
MIG’s leverage will be high, relative to rated peers, liquidity is expected to be moderate, and investment will be rapid. Moreover, MIG’s track record is limited and there is some key man risk. The ratings on MIG do benefit from its permanent capital base, its potentially compelling strategy, and a degree of portfolio diversity.
MIG, which is already listed on the Athens Stock Exchange, is in the process of raising up to EUR5.2 billion of fresh equity by means of a rights issue. This process is expected to be completed in early July. As a result, MIG’s ownership and its strategy will change radically.
“The negative outlook principally reflects the possibility that MIG’s investment portfolio may be concentrated in a handful of investments”, added Greenwood.
MIG will have comparative first-mover advantage in the immature private equity arena of Southeast Europe. MIG should benefit from its good contacts and its relationship with MPB, but its chosen investment field is potentially risky. Standard & Poor’s expects the investment portfolio to be reasonably diverse by number, country, and industry, but will be heavily influenced by economic trends in Southeast Europe and the vagaries of investment markets.
The ratings could also be lowered if leverage rises higher than expected, low liquidity is maintained on the balance sheet, or if weak investment performance emerges.
The outlook could be revised to stable if MIG’s investment portfolio proves to be reasonably diverse, there is satisfactory cover of fixed-cost charges, and MIG is able to demonstrate good investment realizations.
