S&P lowers Investcorp

Standard & Poor's said it lowered the long- and short-term counterparty credit ratings on Investcorp Bank BSC and related entity Investcorp SA to BB+/B from BBB/A-2. The long-term counterparty credit ratings remain on CreditWatch with negative implications, where they were placed on Nov. 21.

"The two-notch downgrade reflects our view of the increasingly difficult operating environment for Investcorp's principal business lines of hedge fund investing, private equity and real estate. We understand that Investcorp is in the process of significant deleveraging, and we view this and the relatively conservative approach to originating deals in 2008 as positive for creditworthiness," S&P analyst Nick Hill said in a statement.

"However, in our view, global deleveraging, falling equity and real estate prices, and tight credit are combining to lower the value of Investcorp's proprietary investments, strain funding and liquidity and reduce capitalization," Hill added.

"Moreover, the prospects for higher quality fee income from the core asset management businesses are likely to be constrained by broader weaknesses in economies and financial markets alike, and we expect this to reduce Investcorp's interest service metrics," Hill said.

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