Fitch upgrades YPF

Fitch Ratings upgraded YPF SA's senior unsecured foreign currency rating to BB from B+ and senior unsecured local currency rating to BB from B+. The outlook is stable on both ratings.

Fitch said the actions reflect the continued strength of YPF's financial flexibility and liquidity position despite the difficult Argentine sovereign environment of the past 20 months.

Credit indicators for the first-half of 2003 are at record levels, with EBITDA/interest coverage of 37 times, EBITDA-CAPEX/interest coverage of 29.6x, total debt/EBITDA of 0.4x and a total debt to capitalization of 15.2%.

Fitch said the ratings also incorporate the benefits of YPF's ownership structure, solid operating performance and credit protection measures and proven hard currency-generating ability.

Although the company's credit indicators may suggest rating levels higher than those assigned, the Argentine sovereign's credit profile continues to constrain YPF's standalone credit ratings, Fitch added. Nonetheless, strong credit fundamentals, coupled with the company's cash flow and production diversification, mitigate exposure to transfer and convertibility risk, allowing YPF to be rated multiple notches above the Argentine sovereign's long-term foreign currency rating of DDD.

Even though YPF's debt is technically non-recourse to Repsol YPF, the assigned ratings assume a strong level of support by the parent company, reflecting YPF's importance in the overall group strategy, Fitch said.

S&P rates Nissho Iwai bonds BB-

Standard & Poor's assigned a BB- rating to Nissho Iwai Corp.'s outstanding straight bonds. The outlook is stable.

In April 2003, Nissho Iwai and Nichimen Corp. jointly established a holding company, Nissho Iwai-Nichimen Holdings Corp., under which the companies are now operating as 100% subsidiaries, S&P noted. Since the two companies are likely to share risks and advantages within the holding company structure, the credit quality of Nissho Iwai will be linked to the consolidated creditworthiness of Nissho Iwai-Nichimen Holdings.

The current rating takes into account the possibility of some deterioration in the group's financial profile in the medium to long term, S&P said. However, if additional asset restructuring triggers massive losses that threaten to erode capitalization, there could be a revision of the outlook or a downgrade.

The holding company raised ¥273 billion in capital in May 2003, mainly by issuing preferred stock. Although this contributed to the enhancement of the group's capital base to a certain extent, the group's capitalization is not sufficiently sound, given the risks associated with its investment and loan assets and deferred tax assets, S&P said.

Although Nichimen and Nissho Iwai have been disposing of problem assets, further asset restructuring may also lead to the emergence of additional losses. Amid a difficult business environment, the holding company may be unable to achieve its target of ¥100 billion in recurring profits in fiscal 2005.

The issue ratings on Nissho Iwai's straight bonds are higher than the issuer rating by two notches, reflecting expected support from UFJ Bank if Nissho Iwai has trouble repaying the debt.

Moody's puts Power Finance, IDBI, IFCI on upgrade review

Moody's Investors Service put the Ba1 foreign currency debt rating of Power Finance Corp. and Industrial Development Bank of India and the Ba1 issuer rating of IFCI Ltd. on review for possible upgrade.

The action follows an earlier similar rating action on India's foreign currency debt ceiling.

The ratings are currently all attached to the debt ceiling as they are closely linked to India's sovereign risk, given the government ownership of these financial institutions, Moody's said.

Although Power Finance's relatively healthy financial position justifies both the rating and the current review for upgrade, both IDBI and IFCI have so far been rated in line with the sovereign debt ceiling based purely on external government support. Without imputing any government support, the foreign currency debt ratings of these two institutions would have been much lower, considering their weak financial condition, Moody's said.

ICICI Bank's debt was confirmed at Baa3, a rating that pierced the sovereign ceiling by a notch when it was upgraded earlier this year. Moody's methodology for piercing the ceiling would not currently result in a further upgrade for ICICI Bank if, as a result of the current review, India's foreign currency debt ceiling were to be upgraded to investment grade.

Moody's raises outlook on Export Credit Bank of Turkey

Moody's raised its outlook for the B1 senior unsecured foreign currency bond rating of Export Credit Bank of Turkey to stable from negative in line with the change in the country ceiling for foreign currency bonds.

The change in outlook for Turk Eximbank continues to reflect Moody's view that support from the Turkish Treasury would be forthcoming if the bank were to face financial difficulties.

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