Rationale:  When state-owned banks or corporations undergo the process of privatization, they face a major risk in how the market will react to their new status.  Once the guarantee of their liabilities is lifted, cheap funding (and maybe even any funding) could be harder to find.  Access to market sources could become more difficult and more costly.
 
·  For banks, your counterparties may reduce their limits or deny provision of facilities as they become concerned about the status of your capital and asset quality. 

·  For corporations, creditors will worry over disruptions in your cash flow and over management's ability to manage the shift to a private enterprise mentality.

 

Without appropriate restructuring of the bank's or company's operating philosophy and business, there is a high likelihood of a downgrade in the credit rating, either prior to or after privatization. With lower ratings come higher funding costs.

 

To reduce these risks, GIA offers the following program:

 

1.  An independent rating assessment of your bank or company on a stand-alone, non-guaranteed basis.

 

Ratings affect your standing in the market, they impact the cost of funds, and they shape the perception of the value of your institution, both as a near-term saleable entity and as a long-term asset for equity and fixed-income investors.  Your management can make more realistic decisions knowing the real, underlying credit strength of your bank or company.

 

2.  A confidential report on how credit analysts see the bank (or company's) strengths and weaknesses.  The report will include recommendations on how to achieve a solid credit rating during and after privatization.

 

GIA is in regular contact with the international rating agencies, gathering their views on rating matters and on issues such as privatization.  This information would be part of the report.

 

3.  Preparation for the rating agency visit.  The rating agencies have special criteria when assessing a privatizing bank or company.  The performance of bank/company managers in the rating meetings is crucial. GIA will provide the strategic understanding and tactical tools to overcome the uncertainties in the rating process.

 

GIA will explain those areas of the balance sheet and income statement that will receive special scrutiny as the official guarantee on your liabilities drops away.  We will show how the agencies perceive your particular regulatory, financial and competitive risks.

 

Contact Global Investment Advisors, Inc. today at rpngia@gmail.com