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Moody's sends International Investment Bank to junk area with 4-notch downgrade
International rating agency Moody's has downgraded the International Investment Bank's (IIB) long-term issuer and senior unsecured debt ratings by four notches to Ba1 from A3, placing it just under the upper bound of the junk area.
At the same time, Moody's has placed IIB's ratings on review for further downgrade.
The rating action was triggered by the unexpected joint announcement of four European Union shareholders to plan to withdraw from the bank, published on March 2.
In their announcement, the Ministries of Finance of the Czech Republic, Romania, Slovakia and Bulgaria stated their intention to discontinue their shareholder participation in IIB, aiming for an orderly withdrawal. Consequently, Moody's no longer assumes that these shareholders will provide additional non-contractual support to the bank in a situation of financial stress.
The four EU member states' likely withdrawal will leave Russia (Ca negative) and Hungary (Baa2 stable) as the major shareholders in IIB and increases ownership concentration, implying that even if Russia and the remaining shareholders remained committed to the institutions, the ability to provide support is significantly lower going forward.
Moody's considers ownership concentration a Governance consideration under its ESG framework.