Moody’s to Examine CorpGroup

Moody’s has placed the ratings of CorpBanca entities, including CorpBanca’s Baa2 rating and Corp Group Banking’s Ba3 mark, on review for downgrade, it says. The decision is based on growing uncertainties regarding the effects on the Chilean bank’s institutional funding and earnings performance of developments at its sister company, retailer SMU, whose B3 rating is also review for downgrade. “While the direct financial connections between CorpBanca and SMU are limited in terms of loans and funding, the companies’ shared majority shareholder [businessman Alvaro Saieh] and the overall tighter market conditions have led to concerns regarding increasing funding costs that are likely to affect the bank’s profitability,” the agency says. Moody’s will also focus on the management of CorpBanca’s balance sheet under dynamic market conditions, and its ability to extricate itself from the headline risk related to SMU, through greater clarity regarding the group’s plans and progress in resolving SMU’s financial problems. CorpBanca had already concerned rating agencies following its purchase of Santander Colombia and Helm Bank in Colombia. CorpBanca is rated Baa2/BBB/BBB+. SMU is in the process of raising $600m in fresh equity and asking bondholders for covenant waivers, following the revelation this year of higher-than-indicated losses and a breach of debt covenants.