Mixed ratings for Atradius
Trade credit insurer Atradius rounded off a turbulent week on a positive note, with Moody’s assigning it an A3 credit rating.
The company had last week been downgraded to BBB by Standard & Poor’s (S&P) – just two grades above junk.
Moodys’ rating follows suit from that of AM Best, the specialist insurance ratings agency, which assigned Atradius a rating of ‘A’ in September.
S&P downgraded Atradius due to the exposure of its parent company, Grupo Catalana Occidente (GCO) to Spanish sovereign debt. S&P’s rating places great importance on sovereign debt: companies are only allowed one notch of potential lift against a sovereign rating. It acknowledged in its report, however, that despite the downgrade, Atradius is well-capitalised.
Atradius’s director of UK and Ireland Alun Sweeney assures GTR that the company is in a healthy position. He says: “We’ve never had so much cash, so much liquid equity. We’ve never had such strong shareholder funds. We’ve never been so overcapitalised, Catalana [GCO] has invested very heavily in us and Catalana in Spain is a very cash-rich company. As an operating entity we’re strong but we’re faced with the problems that exist in Spain.”
Sweeney expects the impact of the downgrade to be “minimal”. For while many banks will only deal with trade credit insurers that have a credit rating minimum of A, most can select the rating from either Moody’s, S&P or AM Best.
Both agencies, however, noted that Spain’s ongoing debt crisis could have further impact on Atradius’s rating, with Moody’s saying that its “credit quality can potentially be constrained by its ownership by GCO”.
Alban de Malherbe, head of Lloyds of London coverholder Equinox Global in France, tells GTR that he believes smaller trade credit insurers could stand to benefit from Atradius’s downgrade. He says: “It is a chance for us. We are taking advantage of the Lloyds support and the market is rated at AA+. It helps a lot. There are very few insurers now on the market with A or AA+ rating.”