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Meinl Debt Rated ‘Highly Speculative’ as Fitch Sees Legal Risks

Meinl Bank AG, the Austrian lender owned by the coffee-roasting Meinl family, was assigned a B credit rating by Fitch Ratings, meaning it considers the firm’s debt as “highly speculative.”

The assessment reflects legal and reputational risks Meinl Bank is exposed to due to both past and present business, Fitch said in a statement today. The ratings company also cited Meinl’s “below-average corporate governance,” complex ownership structure and “extraordinarily high” dividend payouts. While its capital is adequate, it could erode quickly should legal risks materialize, Fitch said.

“Fitch acknowledges Meinl Bank’s efforts to reposition its business model,” analysts Christian Kuendig and Krista Davies said in the statement. “While Fitch understands that Meinl Bank’s central and eastern European corporate-finance transactions at all times comply with relevant laws and regulations, they are often motivated by regulatory or tax arbitration considerations and expose Meinl Bank to what Fitch considers to constitute additional reputational risk.”

Meinl Bank Chairman Julius Meinl V, scion of the family that owns the lender, is free on a record 100 million-euro ($133 million) bail since 2009 as Austrian prosecutors investigate him on allegations of fraud and misuse of funds. Meinl denies the accusations, which are linked to its former affiliate property firm Meinl European Land, and has said he didn’t break the law. No charges have been brought.

Meinl Bank settled a multibillion-euro dispute with Meinl European Land’s successor company Atrium European Real Estate Ltd. in 2011.

Meinl spokesman Thomas Huemer said the fact that the bank requested the rating shows its transparency and that it has surmounted past issues. He declined to comment on Fitch’s statement.

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