Standard & Poor’s Ratings Services, which on Monday placed its BB+ long-term counterparty credit rating on Bahrain-based BMI Bank on CreditWatch with negative implications, said that the proposed merger would create a $4.5billion bank in Bahrain. Also S&P affirmed its B short-term counterparty credit rating on the bank.
“The CreditWatch action comes after BMI Bank announced, on May 22, 2013, that it was working on a potential merger with Al-Salam Bank-Bahrain (not rated). It is based on our expectation that BankMuscat (A-/Stable/A-2), the largest shareholder of BMI Bank, holding 49%, will see a significant dilution in its stake in BMI Bank if the proposed merger goes ahead. We currently assess BMI Bank as strategically important to Oman-based BankMuscat. As a result, we incorporate three notches of uplift from the ‘b+’ stand-alone credit profile (SACP) in our ratings on BMI Bank,” S&P in a statement said.
“Available details on the transaction are limited. For instance, we have no information on the contemplated transaction structure. While the merged entity’s business position in Bahrain should be stronger than that of BMI Bank, potentially ranking third in size, we have limited information to assess the future financial profile of the merged entity. Al-Salam Bank-Bahrain is a listed Sharia-compliant bank which largely engages in retail and investment banking related activities, whereas BMI Bank is a conventional bank with focus on retail and commercial banking.”
“We understand that the transaction has been agreed in principle by the two boards of directors but is yet to receive formal approval from shareholders and the regulator,” S&P in a statement said.