Fitch Affirms 'BBB' IDR on Investcorp Bank & Subsidiaries; Outlook Positive

Business Wire, Sept 19, 2007

CHICAGO -- Fitch Ratings has affirmed the following ratings on Investcorp Bank BSC and its subsidiaries, Investcorp SA and Investcorp Capital Ltd. There was $983 million of long-term debt outstanding as of June 30, 2007.

Investcorp Bank BSC

--Long-term Issuer Default Rating (IDR) 'BBB';

--Short-term rating 'F2';

--Individual 'B/C';

--Support '5';

--Support floor 'NF'.

Investcorp SA

--Long-term IDR 'BBB';

--Short-term rating 'F2';

--Individual 'B/C';

--Support '5';

--Support floor 'NF'.

Investcorp Capital Ltd.

--Long-term IDR 'BBB';

--Senior debt 'BBB';

--Short-term rating 'F2';

--Individual 'B/C';

--Support '5'.

The Rating Outlook is Positive on all of the ratings.

The ratings reflect the strength of Investcorp's Gulf-based franchise, diversified funding mix (by tenor and source), good liquidity, strong profitability, and demonstrated alternative investment expertise. Profitability was particularly robust for the fiscal year ended June 30, 2007. Investcorp benefited from strong private equity and fund-of-fund investment performance, as well as continued strong client inflows. Notably, a sizable portion of Investcorp's income is driven by changes in the fair value of investments held on its balance sheet, as the firm co-invests with its clients in all deals.

Investcorp recently redeemed 200,000 series A preference shares for approximately $222 million (including dividends) and increased its dividend payout to $75 per share. Fitch believes Investcorp's current level of capital is sufficient to support its business and asset mix at the 'BBB' level, and notes that the firm's capital base (adjusted for the preference share redemption and increased dividend) has increased since June 30, 2006.

Material improvement in leverage, sustained earnings diversification, and fee generating capacity sufficient to cover operating expenses would have a positive impact on future rating actions.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.