Standard & Poor's Maalot Ltd. has cut its rating for IDB Holding Corp. Ltd. (TASE:IDBH) and three of its subsidiaries, but reiterated its rating for Koor Industries Ltd. (TASE:KOR).
Maalot downgraded IDB Holding to A+ from AA-. It downgraded holding companies IDB Development Corporation Ltd., Discount Investment Corporation (TASE: DISI), and Clal Industries and Investments Ltd. (TASE: CII) to A+ from AA.
Maalot reiterated its A+ rating for Koor.
The downgrades are no surprise. Maalot cited the rise in IDB's aggregate financial leverage, mainly due to the reduction in value of most of the holding companies' subsidiaries. A contributing factor was the investment of the bulk of IDB's cash reserves in current holdings as well as new ones, such as Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ) and retailer Groupe Carrfour SA (Euronext:CA) through Koor.
Maalot calculates IDB's financial leverage as the net debt to portfolio value ratio of IDB's five holding companies, which has risen to 55% from 35% before the outbreak of the market crisis. Although Maalot notes that IDB's financial leverage has improved recently, it cautions, "The company's financial leverage is high compared with European holding companies, but in line with the present rating, given the characteristics of the group's portfolio. In addition, the company's management is taking a less conservative policy than before, as reflected in the making of new investments even in periods of falling markets."
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2009
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