Moody's lowers 3i

Moody's Investors Service said it downgraded the senior unsecured debt and issuer ratings of 3i Group plc to Baa1 from A2. Short-term ratings were also downgraded to P-2 from P-1. Ratings remain on review for further downgrade.

The agency said the downgrade reflects a significant rise in projected gearing levels for 3i, reduced ability to generate positive cash flow and sustained negative operating environment for private equity firms in the United Kingdom and Europe.

"Because of lower cash generation capacity and the difficult economic environment ahead, we believe 3i will continue to be challenged to reduce their gearing levels," Marjan Riggi, a Moody's vice president, said in a statement.

Ratings reflect 3i's solid franchise, its tight investment decisions, asset allocation processes, granularity of its portfolio and its reference-player status, which helps it to have superior access to private equity deal flows, the agency said.

Ratings also incorporate the volatile nature of private equity investments and their exit realizations, the company's high gearing and low interest coverage ratios, and the expectation of difficult economic conditions, the agency noted.

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