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Maalot downgrades Clal Finance by two notches By Yuval Maoz Israel security ratings company Maalot S&P has downgraded the credit rating of Clal Finance by two notches, and placed it on a negative outlook to boot. Maalot analysts explain that the lower rating for the IDB group company's liquid bonds is based upon the continuing erosion of Clal Finance's financial results due to its high leveraging. In short, it borrowed very heavily and now faces heavy payments. The company's bonds are now rated ilA-, down from ilA+. Advertisement There is currently just one bond series, worth about NIS 326 million, which is trading at a yield of 10%, indicating low-level disquiet among investors as to the company's repayment ability. "The short-term ability of the mother company, Clal Holdings, to provide financial backing," write Maalot analysts, "has been compromised due to the regulatory capital restrictions of [Clal Finance's] sister company, Clal Insurance, which are expected to affect the upcoming dividends it will be paying to the mother company." The analysts also cite the erosion in Clal Finance's activities in a number of areas, such as mutual funds, whose managed assets have declined along with the rest of this sector. Those assets have shrunk to NIS 11.5 billion, of which NIS 4.5 billion is in money market funds. "The downward trend in the scope of the assets being managed," continues the analysts' report, "along with an increase in the assets in the money market funds, which have so far not been charging management fees, has resulted in a decline in the company's revenues from this activity." "Clal Finances is an important strategic arm for Clal Holdings Insurance Businesses," concludes the report, "but the group's financial flexibility could be diminished in the short term, as well as the sources at its disposal for providing support to Clal Finance." Bookmark to del.icio.us   Following Chavez Bolivia cuts ties with Israel, says it seeks war crimes charges. Who needs the Knesset? Arab parties: We'll establish an alternative Arab parliament.

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