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3 years ago
Fitch Assigns Alfa Bank's Subordinated Notes BB+ Final Rating
November 20, 2014 / 9:23 AM / 3 years ago

Fitch Assigns Alfa Bank's Subordinated Notes BB+ Final Rating

(The following statement was released by the rating agency) MOSCOW/LONDON, November 20 (Fitch) Fitch Ratings has assigned Russia-based Alfa Bank's (Alfa) USD250m subordinated loan participation notes (LPNs) issue with write-off feature a final Long-term rating of 'BB+'. KEY RATING DRIVERS Fitch has rated Alfa's 'new-style' Tier 2 subordinated debt issue one notch lower than the bank's 'bbb-' Viability Rating (VR). This includes (i) zero notches for additional non-performance risk relative to the VR, as Fitch believes these instruments should only absorb losses once a bank reaches, or is very close to, the point of non-viability (PONV); and (ii) one notch for loss severity reflecting below average recoveries in case of default. LPNs have principal and coupon write-down feature (pro rata with other loss absorbing instruments) triggered in case (i) core Tier 1 capital adequacy ratio decreases below 2%; or (ii) the Deposit Insurance Agency directly or indirectly acquires a controlling stake in the bank and/ (or) provides financial assistance to it as part of an approved bankruptcy prevention plan. Although legally the latter is possible as soon as a bank breaches any of its mandatory capital ratios or is in breach of certain other liquidity and capital requirements, Fitch's base case assumption is that the regulator will not trigger loss absorption until a bank has reached (or is very likely to reach) PONV. The 'new-style' subordinated LPNs were issued by an Irish-based special purpose vehicle, Alfa Bond Issuance plc, which has on-lent the issue's proceeds to Alfa under a subordinated loan agreement. The LPNs annual coupon was set at 9.5% and payable semi-annually and the principal is due 18 February 2025. No put option is envisaged to the issues, while the call option after five and a quarter years allows Alfa to repay the bonds once the regulatory capital amortisiation begins. For more details on Fitch's approach on rating subordinated debt issues of Russian banks see 'Fitch Affirms Russian State-Owned Banks' Old Sub Debt, Indicates Approach For Rating New Issues' dated 18 April 2013, and 'Implementation of New Capital Rules in Russia: Moderately Positive, Unlikely to Lead to Rating Changes', dated 19 April 2013, at www.fitchratings.com. RATING SENSITIVITIES The issue rating is linked to the bank's VR, which is similar to its IDR. The bank and its issue ratings could be downgraded in case of a sovereign downgrade and a significant weakening of the Russian operating environment, or a sharp deterioration in the standalone credit metrics. Stabilisation of the sovereign's credit profile and the country's economic prospects would reduce downward pressure on the VR. Alfa's other ratings (below) are unaffected: Long-term foreign currency IDR: 'BBB-'; Outlook Negative Long-term local currency IDR: 'BBB-'; Outlook Negative Short-term foreign currency IDR: 'F3' National Long-term rating: 'AA+(rus)'; Outlook Stable Viability Rating: 'bbb-' Support Rating: '4' Support Rating Floor: 'B' Senior unsecured debt: 'BBB-'/'AA+(rus)' 'Old-style' subordinated debt: 'BB+' Contact: Primary Analyst Alexander Danilov Senior Director +7 495 956 24 08 Fitch Ratings Moscow Valovaya Str, 26 Moscow Secondary Analyst Anton Lopatin Director +7 495 956 70 96 Committee Chair Olga Ignatieva Senior Director +7 495 956 69 06 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, Global Financial Institutions Rating Criteria dated 31 January 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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