(Source: Info-Prod Research (Middle East))November 18, 2009Moody's Investors Service is maintaining a stable outlook on its Aaa rating for the Asian Development Bank (ADB). According to its newly published credit analysis, the rating is underpinned by ADB's prudent fiscal policies, strong shareholder support, and preferred creditor status. Headquartered in Manila, ADB is a multilateral development bank with a mandate to eliminate poverty in the Asia-Pacific region through financial and technical assistance. The bank's long-term strategic framework also includes inclusive growth, environmentally sustainable growth, and regional integration. "The bank's fifth general capital increase agreed this year -- which will be a substantial and timely expansion of ADB's capital base -- demonstrates strong shareholder support," says Aninda Mitra, Moody's Senior Analyst, and author of the report. He added that "the general capital increase will support much needed regional lending operations amidst the global slowdown and dislocations in financing conditions." In the run-up to the shareholders' approval of the general capital increase, "sizeable increases in outstanding loans and investments were beginning to constrain lending and borrowing headroom, but had not weakened ADB's credit profile or its income-generating capacity," said Mitra. The bank's preferred creditor status was tested -- and remained resilient -- during several sovereign defaults and restructurings in the 1980s and 1990s, as well as the recent economic downturn at poorer borrowing member countries. Although asset concentration is relatively high, with sizable exposuresto Indonesia, China, India, Pakistan, and the Philippines, non-accruals and callable contingent guarantees remain negligible. Mitra explains that "the bank's strong preferred creditor status provide substantial protection against the worst-case -- though highly unlikely -- scenario of several of the bank's large borrowers entering non-accrual status. Nonetheless, should such a dire scenario emerge, the bank's bondholders would also be protected by the large amount of callable capital available to ADB."

Originally published by Info-Prod Strategic Business Information.

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