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Fri 18 Mar 2011 03:29 PM

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S&P lowers ratings on Bahrain, central bank, SWF

Ratings agency says action taken because of continuing uncertainty on political, economic future

S&P lowers ratings on Bahrain, central bank, SWF
S&P lowers ratings on Bahrain, central bank, SWF
S&P lowers ratings on Bahrain, central bank, SWF
S&P lowers ratings on Bahrain, central bank, SWF

Standard & Poor's Ratings Services said on Friday that it has lowered its long- and short-term local and foreign currency sovereign credit ratings on Bahrain.

The ratings remain on CreditWatch with negative implications, where they were initially placed on February 21, the rating agency said in a statement.

At the same time, it lowered the ratings on the Central Bank of Bahrain and Bahrain Mumtalakat Holding Company, the sovereign wealth fund.

Those ratings also remain on CreditWatch with negative implications, it said.

"The lowering of Bahrain's long-term sovereign rating reflects our view that its political and economic environments are fundamentally more challenging as a result of the events of the last three weeks," said Standard & Poor's credit analyst Mike Noone.

S&P said it believes that the arrival of mainly Sunni troops and police from the rest of the GCC, and the Bahraini government's declaration of martial law, could polarise both sides instead of stabilizing what is a highly-charged political situation.

"It is our opinion that the current strife will likely inflict damage to Bahrain as a tourist destination and, more importantly, as an offshore financial center in relation to other competing cities in the Gulf."

It added that the ratings could be removed from CreditWatch and stabilise at current levels if there "is a reconciliation that in our view starts restoring the social contract and drawing a line under the damage done to Bahrain's economic model".

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