“When they can’t stress us to death, it is very hard to understand their model.” This is the immediate comment from CEO Erik I. Lassen on Moody’s downgrading of Danish Ship Finance (DS).
He believes that DS has done its part to explain its current conditions to the rating bureau, but this has not changed the attitude of Moody’s, who downgraded a series of Danish banks and credit institutions yesterday, DS included.
“We have helped them interpret our results at a completely different level than ever before, and, like it says, Moody’s recognizes that we have good capital, a good liquidity, and that we are able to handle our volatility in the market. In the stress tests Moody’s has put us through, where they, among other things, simulate what we could lose if things start to go wrong, we come out with the highest marks possible in liquidity and capital. If 25 percent of our customers go bankrupt and ship values drop by 75 percent, we will still be meeting statutory requirements,” Erik I Lassen tells ShippingWatch.
Moody’s downgrading of the Danish Ship Finance will push funding costs up, making it more expensive to borrow money.
“We must expect that the same thing will happen to our competitors,” says Erik I. Lassen.
“Considering that we were told to expect five notches (steps, ed.), and received three, we ought to be pleased. Also when looking at how other lenders have been hit. But we believe, basically, that Moody’s are wrong about the situation in Denmark.”
Erik I. Lassen stresses that Danish Ship Finance has wound up on Moody’s negative-list because the ship credit company issues bonds, and because they are in the shipping industry.
“Some things are law, and it has been like that with us for 50 years. We haven’t changed, but Moody’s has. It is our business model, plain and simple. It is not because there is any risk of us losing a lot of money or going out of business. We have done what we could, but it’s unfortunate that legislators (EU, ed.) are busy writing the rating bureaus into as many regulations as they are currently doing,” says Erik I. Lassen.