Brokerages/Wall Street
Is Borat's Credit Still Good?
By Mark DeCambre
TheStreet.com Senior Writer
8/15/2007 4:25 PM EDT
URL:
http://www.thestreet...t/10374545.htmlIs Borat the next victim of the subprime wipeout?
A "special comment" issued Wednesday by ratings agency Moody's (MCO) suggests it could be so. The firm says banks in Kazakhstan -- home of comedian Sacha Baron Cohen's fictional character Borat Sagdiyev -- may face some liquidity challenges in the coming months if the recent credit crunch continues to intensify.
According to a Moody's report written by Armen Dallakyan, Kazakh banks "are among the largest issuers of emerging market debt and are therefore vulnerable to a deterioration in international investor sentiment."
The news comes as world credit markets have been disrupted by the bad loans made to U.S. borrowers with shaky credit. The upheaval has hobbled European banks such as BNP Paribas and upended a pair of Bear Stearns (BSC) hedge funds.
Amid the tumult, Moody's and rival Standard & Poor's have been accused of failing to warn investors of the impending danger of loose credit terms.
A call to Moody's was not immediately returned.
The Moody's report says the Kazakh banks could face refinancing risk from their debt funded by external borrowings, if credit markets tighten for a prolonged period.
Kazakh banks had total international borrowings of the equivalent of more than $40.7 bilion in the first half of the year, compared with $33.3 billion in 2006. That was a year in which the country's banks had doubled their external borrowings from 2005.
Moody's points out that its ratings for Kazakh banks already incorporate a moderate degree of refinancing risk and that the country's banks have "a strong liquidity cushion." But the firm warns that tightening credit could prove problematic for select banks.