Standard & Poor’s Ratings Services lowered its long- and short-term foreign and local currency issuer credit ratings on Bahrain Mumtalakat Holding Co. to BBB-/A-1 from ‘BBB/A-2’. The outlook on the long-term ratings is negative.
The downgrade of Mumtalakat follows our downgrade of the Kingdom of Bahrain to’BBB-/A-3′ from ‘BBB/A-2’ as we equalize our ratings on Mumtalakat with the ratings on Bahrain, reflecting our opinion that there is an “almost certain” likelihood that the government of Bahrain would provide timely and sufficient extraordinary support to Mumtalakat in the event of financial distress. The government does not formally guarantee Mumtalakat’s financial liabilities, however,” S&P in a statement said.
“Mumtalakat is the investment company for Bahrain’s strategic assets in sectors other than oil and gas. Wholly owned by the Bahraini government, Mumtalakat held stakes in 36 commercial enterprises that represented a portfolio of approximately BD 2.7 billion ($7.2 billion) as of June 30, 2014, across a variety of sectors, including aluminum production, financial services, telecommunications, real estate, tourism, transportation, and food production.”
“The negative outlook on Mumtalakat reflects our view of downside risks to the ratings on Bahrain, given our assumption that Mumtalakat’s integral link with and critical role for the Bahraini government will remain unchanged.
Therefore, we could revise the outlook to stable if we revise the outlook on the sovereign to stable.”
“We continue to assume that the government will provide direct coverage of losses at Gulf Air, as required. Should our view of Mumtalakat’s role for and link with the government weaken, this could affect our assessment of the likelihood of extraordinary support and cause us to lower the ratings on Mumtalakat. We could revise our view on Mumtalakat’s role for and link with the government if it decided not to cover Gulf Air’s losses or to act in a timely manner to protect Mumtalakat.”