KATHMANDU: International rating agency AM West has downgraded the financial capacity and credit rating of Himalayan Reinsurance Company Limited. The agency has downgraded Himalayan Rico Financial Strength Rating from ‘B Plus (Good)’ to ‘B(Fair)’.
Similarly, the company’s long-term issue credit rating has also been downgraded from “Triple B Minus” (Good) to “Double B Plus” (Fair). Along with downgrading the rating, AM West has placed these ratings received by Himalayan Relay on the list of reviews with negative impacts. According to AM West, the Himalayan Rico balance sheet is still very strong and the operating performance is adequate. However, the company’s business profile is rated as limited and institutional risk management is marginal and weak.
AM West has explained the 2 main reasons for downgrading the rating and keeping it under negative monitoring.
Delay in audit reporting: Failure or delay in disclosing its audited financial statements on time.
Weaknesses in corporate governance and risk management: Investigations by regulatory bodies and research agencies have revealed serious deficiencies in corporate governance and risk management capabilities within the company.
The Central Investigation Bureau (CIB) of Nepal Police, the Department of Money Laundering Investigation, and the Securities Board of Nepal (SEBON) are investigating the company and its promoters and operators.
According to the investigation by the Nepal Police and Regulatory Authority, the promoters like Deepak Bhatta, Sulav Agrawal, Shekhar Golchha and other individuals and associated groups have personally or illegally invested in the share market and manipulated the market by misappropriating funds worth Rs 4 to 5 billion from Himalayan Reef companies.
The findings that public company funds have been diverted privately or unauthorizedly have raised a big question mark on the credibility of Himalayan Rico’s board of directors and management and the system of good governance in the eyes of international agency AM West.
AM West has downgraded the rating citing the company’s institutional risk as the main basis for this action and investigation by the Government of Nepal’s research agencies.
Despite the financial turmoil, the company’s balance sheet is still very strong in terms of financial indicators and capital, AM Best said. While the state of business operations and claim payments is considered adequate, the loss of financial transparency due to illegal fund transfers and investigations has also put its strong financial position at risk.
According to AM West, the rating will remain under negative scrutiny until the investigation is completed and the final results of the investigation do not fully review the impact on Himalayan Rico’s financial strength and creditworthiness. AM West has warned that the company’s rating could be further downgraded if the investigation is found to cause significant financial or legal damages to the company.
