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Fitch Ratings Downgrades Banco Comercial del Uruguay.

Business Editors


Fitch Ratings announced today that it has downgraded Banco Comercial del Uruguay's (BCU) Long-term debt rating to 'BB+', Rating Watch Negative from 'BBB-', Negative Rating Outlook. The downgrade reflects concerns with BCU's substantial exposure to Argentine public and private sector borrowers, as well as with possible negative repercussions for the bank following fraud allegations made in Argentina against two members of BCU's board, Carlos Rohm, BCU's general manager, and Jose Rohm, both indirect minority shareholders of BCU. The Rating Watch reflects the continued uncertainty surrounding the bank's current situation, which could lead to further rating actions in the near future. Uruguay's largest private sector bank and leading retail bank, BCU is controlled by a group of three strong international financial institutions, JPMorgan Chase, Credit Suisse First Boston, and Dresdner Bank Lateinamerika, which jointly control 74% of BCU's voting shares.

The Central Bank of Uruguay announced yesterday that the Rohm brothers had resigned their positions in BCU's management, and that a new general manager would be appointed within 48 hours. These events unfolded in the wake of allegations of potentially substantial fraud at Argentina's Banco General de Negocios, which was indirectly controlled by the Rohm brothers, and in which the three financial institutions named above are minority shareholders.

BCU's Argentine exposure, well in excess of its current equity base, will be heavily affected by that country's moratorium on most foreign payments, and results at the bank will reflect this negative effect. Conservative provisioning for this exposure would be in excess of BCU's current earnings, and the bank has yet to announce the measures it will take with regard to its exposure. Given the need to provide against this exposure, and the potential that the allegations of fraud may affect the bank, shareholders may face a difficult decision as to further support for the bank. Given BCU's prominent position in the Uruguayan market, though, we are confident that Uruguay's Central Bank can and will provide BCU with support, should it prove necessary.
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Publication:Business Wire
Date:Feb 1, 2002
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