Fitch upgrades bonds of two Bahraini banks

Fitch Ratings said it upgraded three outstanding bonds issued by two Bahraini banks as follows: Gulf International Bank's $350 million floating-rate notes to A- from BBB+, its $400 million subordinated debt to BBB+ from BBB and Ahli United Bank's $100 million subordinated debt to BBB from BBB-.

The upgrade follow the implementation of a new banking law by the Kingdom of Bahrain effective from Sept. 6 that incorporates new provisions in relation to the priority of claims in the event of a liquidation of a banking licensee, the agency said. Importantly, the new provisions eliminate the previous subordination of term borrowings.

Under the old law, depositors had preference over other creditors in liquidation, which Fitch said meant that the rating of senior unsecured debt would be notched down once from the issuer default rating and the subordinated debt would be notched down twice. Under the new law, save for deposits under BHD20,000, the claims of all other depositors now rank equally with those of all other unsecured debt holders.

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