Ampal-American Israel Corporation (NASDAQ: AMPL) announced today that Midroog Ltd. ("Midroog"), an affiliate of Moody's Investors Service, has downgraded Ampal's Series A, Series B and Series C Debentures (the "Debentures") ratings by one notch to BAA1 from A3, and classified its outlook as negative. The Debentures remain on Midroog's "Watchlist”.
In its report, Midroog stated that the downgrade was due to the on-going geo-political environment uncertainties in the region in which East Mediterranean Gas Company S.A.E. (“EMG”) operates, and is further substantiated by the downgrade of the State of Egypt's credit rating. Midroog noted that EMG constitutes a substantial portion of Ampal's portfolio and factors significantly into Ampal's expected future cash flow.
Midroog also noted that as announced, since February 5, 2011, the gas supply from Egypt to Israel has been halted, and resumption is expected no later than March 4, 2011. The Debentures’ ratings will remain on Midroog's "Watchlist" until it becomes evident that continuous gas flow can be sustained over a period of time. Midroog further stipulated that the current rating does not reflect a situation in which gas supply will not resume shortly.
Midroog further estimates that the aforesaid might have an effect on Ampal's total assets and financial stability to a degree that cannot currently be estimated.However, Midroog believes the closing of the sale of 012 Smile will substantially benefit Ampal's liquidity, and will improve risk assessment on a short term basis. Mr. Yosef A. Maiman, Chairman, President and Chief Executive Officer of Ampal commented on Midroog's report: "I believe that the downgrading of Egypt's credit rating should have no implication on EMG's business risk profile, as Egypt's interest in foreign currency income remains." Mr. Maiman continued: "In recent months, Ampal's asset value and liquidity has increased. Furthermore, the market yield of Ampal's Debentures reflect the public's trust in Ampal, its subsidiaries and the resumption and continued gas supply by EMG."