Fitch downgrades Demirbank's long-term rating - UPDATED

Baku. 11 November. REPORT.AZ/ Fitch Ratings has downgraded Azerbaijan-based Demirbank OJSC's (Demir) Long-Term Issuer Default Rating (IDR) to 'CCC' from 'B-' and Viability Rating (VR) to 'f' from 'ccc'. 

Report informs referring to the Fitch Ratings official website, the ratings have been removed from Rating Watch Negative (RWN). 

At the same time, Fitch has withdrawn Demirbank's ratings for commercial reasons. Accordingly, Fitch will no longer provide ratings or analytical coverage for Demirbank.

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'The downgrade of Demirbank's VR to 'f' reflects Fitch's view that the bank has failed, as reflected by a material capital shortfall', Fitch says. 

The agency believes Demirbank is reliant on the Central Bank of Azerbaijan's regulatory forbearance to comply with prudential capital adequacy ratios, and requires extraordinary external capital support to restore its solvency.

'The downgrade of Demir's Long-Term IDR to 'CCC' reflects Fitch's view of a real possibility that Demir will default on its obligations to senior unsecured creditors as a result of its material capital shortfall and weakened liquidity position. Demir has announced plans for a AZN50m equity injection, but this may be insufficient to restore the bank's solvency, given its sizable unreserved non-performing loans (90 days overdue, principal only) and accrued interest equalling to AZN118m and AZN30m respectively', rating agency writes.

On 15 September 2016, Fitch had downgraded Demir's Long-Term IDR of Demir to 'B-' from 'B' and its VR to 'ccc' from 'b'.