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Moodyâ€™s downgrades Azerbaijanâ€™s UniBank for refinancing risk

21 November 2008 08:42 (UTC +04:00)

Baku. Elmin Ibrahimov â€“ APA-Economics. Moodyâ€™s Investors Service has lowered the outlook on the B2 long-term foreign and local currency deposit ratings of Azerbaijan-based UniBank to â€˜negativeâ€™ from â€˜positiveâ€™.
Moodyâ€™s decision to change Unibankâ€™s outlook to â€˜negativeâ€™ reflects weakening liquidity position and increased refinancing risk faced by the bank. The negative outlook also reflects concerns about Unibankâ€™s ability to refinance its debt obligations without having significant reduction in its business activity.
"Moodyâ€™s notes that the rapid growth of Unibankâ€™s assets in recent years has been mainly funded by international borrowings which increased from US$ 33 mln in 2006 to US$ 223 mln in 2008 exceeding 50% of the bankâ€™s total liabilities," said Lev Dorf, a Moodyâ€™s Associate Analyst.
"In Moodyâ€™s view, this high reliance on market funding renders Unibankâ€™s liquidity position vulnerable, exposing the bank to higher refinancing risk especially amid tight liquidity conditions on the international markets with limited access to wholesale funding from abroad," added Dorf.
Moodyâ€™s expects Unibank to repay its forthcoming debt obligations partly through the liquidity support to be obtained from the National Bank of Azerbaijan which has already agreed to provide a loan for US$ 62 mln to Unibank.
The outlook on Unibankâ€™s ratings could return to stable if the bank successfully refinances a substantial portion of foreign borrowings that are due for repayment. At the same time, any further deterioration in the bankâ€™s liquidity position, including increasing reliance on support from National Bank of Azerbaijan, will indicate weakening of the bankâ€™s standalone credit strengths and could negatively affect its deposit ratings.