Bahrain Mirror: Fitch Ratings has downgraded Bahrain Mumtalakat Holding Company's (Mumtalakat) Long-Term Issuer Default Ratings (IDR) to 'BB-' from 'BB+' and maintained it on Rating Watch Negative (RWN).

It did the same thing to Sokouk Holding Company.

Fitch has also downgraded The Oil and Gas Holding Company (nogaholding)'s Long-Term Foreign- and Local-Currency IDRs to 'BB-' from 'BB+'. The long-term ratings on nogaholding's global medium term note programme (senior unsecured) and nogaholding's USD 1 billion senior unsecured notes due 25 October 2027 have been also downgraded to 'BB-' from 'BB+'.

Fitch explains that the rating actions follow the downgrade of the Long-Term IDRs of Mumtalakat and nogaholding's sponsor, Bahrain, to 'BB-' from 'BB+' on 1 March 2018.

Fitch classifies Mumtalakat and nogaholding as credit-linked entities under its Government Related Entities rating criteria.

The agency considered that the ratings of two companies are equalized with those of Bahrain, reflecting their status as wholly owned corporations, and strong track record and expectations of control by and their prominent policy missions for the sovereign.

Fitch considers there is a very high probability of the company receiving extraordinary government support, if needed.

Fitch expects to resolve the RWN on Mumtalakat within the next three months following further discussions with Mumtalakat's management and the government officials.

An economic study had urged the Bahraini government to consider liquidating "Mumtalakat" which represents its sovereign Fund, due to high debts on the company, which according to the study further inflates State's debt if included in the general budget.

In this context, the study said that "it is better to make use of Mumtalakat capital to control the currently deteriorating financial conditions of Bahrain's Government which is heading for the worst in the future", noting that it requires the privatization of a number of public institutions.

Mumtalakt has shares in about 40 commercial companies. It owns Gulf Air and large portion of the shares of aluminium Bahrain and Bahrain's National Bank. Its capital amounts to 10.6 billion dollars.

National Audit Office Report revealed last years that Mumtalakat took investment decisions amounting to 20.6 million dinars without holding meetings and didn't implement 7 previous recommendations.

Nogaholding is the investment and development arm of the National Oil & Gas Authority (NOGA). It owns the Bahrain Petroleum Company (Bapco), The Bahrain National Gas Company (Banagas), Bahrain Field Development Company (Tatweer Petroleum), The Bahrain Aviation Fuelling Company (Bafco) and The Gulf Petrochemical Industries Company (GPIC).

The National Audit Office report for the years 2016-2017 revealed that the Oil and Gas Holding Company did not pay 56.4 billion BD of due state returns in 2016. The company used these returns to pay for its commitments for settling a number of oil contracts instead of adding them to the public account, which violates the General State budget Act.

Arabic Version