Moody’s Forecasts Increase in Loan Risks in Azerbaijani Bank

Business Materials 29 April 2008 17:49 (UTC +04:00)

Azerbaijan, Baku, 29 April / corr. Trend I. Khalilova/ TechnikaBank OJSC has got the rating- B2/NP/E+ (stable) from Moody's Investors Service, the agency said.

Moody's changed the rating forecast of the banks, in both national and foreign currency, into B2 'negative' from 'stable'.

The Eurobonds will be emitted for a period of 3-5 years. The bank has registered Texnika Finance B.V in Netherlands to finance the loan for TexnikaBank.

The volume of emission has not been determined yet, however, the maximum sum of the emission will make up about $200mln.

According to experts of the agency, the 'negative' forecast shows that the volume of emission worth $200mln is a very big sum for the bank and that the management of the bank can face risks. Moody's is concerned about the volume of the risks taken by TexnikaBank with regard to the re-financing of the emission and about high dependence of its resources on the market loan. All these issues can cause a drop in independent financial steadiness of the Bank.

Roman Piven, the junior vice-president and senior analyst of Moody's, believes that the 'negative' forecast tells of the intentions to increase the volume of loans and which can result in dependence on the international loan market. Vagueness about the development of situation regarding liquidity and volatility can lead to the additional re-financing risks for the bank, he said.

Taking into consideration the maximum sum of emission, the share of loan resources in the structure of the bank's capital will be too big as the circulation term of the Eurobonds will cost bank much resulting in increase of re-financing risks.

The rating forecast of Texnika Bank can be changed once again into the 'stable' in case the Bank demonstrates a reasonable policy of loan risks and re-financing of risks management, it increases its capitalization and expands its market share. Moody' s believes that the fulfillment of these conditions will contribute to the planned change in the structure of property as the Bank plans to hand over a set of its shares to one of the international financial institutions.

At present, the majority shareholder of the Bank is World Wines with 75% of the shares. Etibar Aliyev, the chairman of the Supervisory Board of the Bank has a control over 15% of the shares and American Kazimir Investment Caspian Fund - 10%.

Texnika Bank has repeatedly postponed the issue of Eurobonds due to the situation in the financial markets, however, the management of the Bank is confident in the successful emission of first Eurobonds not only among the banks, but also in the whole country. There are concrete investors interested in the securities. The Bank will increase the portfolio of Eurobonds stage-by- stage.

Morgan Stanley is the lead-manager of Texnika Bank in the issue of Eurobonds.

The official exchange rate of National Bank of Azerbaijan on 29th April is 0,8288 AZN/USD.

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