Fitch Downgrades Investcorp Bank and Subs' IDR to 'BBB-'; Remains on Watch Negative

NEW YORK--(Business Wire)--
Fitch Ratings has downgraded the long- and short-term Issuer Default Ratings
(IDR) of Investcorp Bank BSC (Investcorp) and its subsidiaries Investcorp SA and
Investcorp Capital Ltd to 'BBB-'and 'F3'. Also, Fitch downgraded the individual
ratings of Investcorp and its subsidiaries to 'C' from 'B/C'. All ratings remain
on Rating Watch Negative (see full list below).

The downgrade reflects the continued deterioration in Investcorp's capital
cushion and materially weaker earnings. During the first half of fiscal 2009,
Investcorp experienced losses in its proprietary hedge fund portfolio, as well
as reduced market valuations in its private equity and real estate investments.
In addition, client assets under management have materially declined, driven
both by client redemptions and declines in fair value, which will further reduce
the company's core revenue going forward. Its current capital position has
significantly diminished from its year-end June 2008 Tier 1 capital ratio of
about 18% to 13% at Sept. 30, and Dec. 31, 2008 despite recent steps to delever,
particularly by reducing its hedge fund allocation. Fitch notes that the company
raised about $26 million of capital in December. 2008; however, this was
insufficient to maintain current ratings.

Investcorp remains on Rating Watch Negative due to concerns about its ability to
raise additional capital. Also, while Investcorp has enough liquidity to meet
near-term obligations, without a capital raise the ability to meet longer-term
obligations would be under pressure. Other concerns include the firm's weakened
earnings profile and potential pressures on asset management fees. The company
has stated it hopes to raise additional capital of at least $250 million. Fitch
believes firm revenues are especially vulnerable to future fair value writedowns
with continued capital markets volatility. Absent significant additional
capital, Investcorp will be downgraded further by at least one notch.

Fitch remains concerned about the potential for further losses which will
negatively affect Investcorp's capital position, its weakened earnings profile
(which could further pressure capital), and the continued market challenges
facing alternative asset managers and investors. Furthermore, Fitch notes
potential for further reductions in assets under management (AUM) due to clients
seeking hedge fund redemptions as well as declining asset values. This reduction
in AUM subsequently has an adverse impact on management fee generating capacity
and ancillary performance fee income (though performance fees are a small
contributor to earnings).

Therefore, Fitch expects that earnings will continue to be weaker than
historical averages and that many of these near-term challenges will continue to
persist throughout 2009. In addition to declining AUM, Fitch expects private
equity activity to be very minimal with funding for new acquisitions and
investment exits being more difficult. Further valuation volatility will also
add pressure to the firm's credit profile.

Investcorp's current ratings are supported by the strength of its Gulf-based
franchise, diversified funding mix (by tenor and source), and demonstrated
alternative investment expertise.

Fitch has downgraded the following ratings which remain on Rating Watch
Negative:

Investcorp Bank BSC

--Long-term IDR to 'BBB-' from 'BBB';

--Short-term IDR to 'F3' from 'F2';

--Individual to 'C' from 'B/C'.

Investcorp SA

--Long-term IDR to 'BBB-' from 'BBB';

--Short-term IDR to 'F3' from 'F2';

--Individual to 'C' from 'B/C'.

Investcorp Capital Ltd.

--Long-term IDR to 'BBB-' from 'BBB';

--Senior debt to 'BBB-' from 'BBB';

--Short-term IDR to 'F3' from 'F2';

--Individual to 'C' from 'B/C'.

Fitch has affirmed the following ratings and removed them from Rating Watch
Negative:

Investcorp Bank BSC

--Support '5';

--Support floor 'NF'.

Investcorp SA

--Support '5';

--Support floor 'NF'.

Investcorp Capital Ltd.

--Support '5'.

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.

Fitch Ratings
Joo-Yung Lee, 212-908-1560, New York
David Spring, 312-368-3194, Chicago
Ted Kronmiller, 312-606-2332, Chicago
or
Media Relations:
Tyrene Frederick-Mack, 212-908-0540, New York
Email: tyrene.frederick-mack@fitchratings.com

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