Fitch downgrades Infrastructure Finance

Fitch Ratings said it downgraded Infrastructure Finance Corp. Ltd.'s ratings, including the national ratings to long-term A(zaf) from AA-(zaf) and short-term F1(zaf) from F1+(zaf), the national rating on its senior notes to A(zaf) from AA-(zaf), the national rating on its subordinated notes to A-(zaf) from A+(zaf) and the national rating on its short-term notes to F1(zaf) from F1+(zaf).

The outlook is stable.

The downgrade reflects the South African company's weaker profitability, tightening liquidity and an increasingly competitive environment, the agency said.

Its operating profits (exclusive of non-cash unrealized fair value adjustments) weakened in fiscal year 2005 due to declining interest rates that adversely impacted the net interest margin, for example. To offset this, Fitch said management has reduced non-interest expense.

The ratings of also take into account the company's unique mission of municipality infrastructure funding and its low credit loss history, the agency said.

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