March 1, 2017 / 4:28 AM / 5 months ago

Fitch Downgrades Kiwibank following Removal of Guarantee from NZ Post

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(The following statement was released by the rating agency) SYDNEY, February 28 (Fitch) Fitch Ratings has downgraded Kiwibank Limited's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'AA-' from 'AA' and Long-Term Local-Currency IDR to 'AA' from 'AA+' following the removal of the guarantee from New Zealand Post (NZ Post). The Outlook is Stable. The rating actions resolve the Rating Watch Negative on Kiwibank's IDRs, which had been in place since 6 April 2016. Kiwibank's Viability Rating (VR) has not been considered as part of this rating action. A full list of rating actions can be found at the end of this commentary. KEY RATING DRIVERS IDRS AND SUPPORT RATINGS The one-notch downgrade in Kiwibank's IDRs follows the removal of the guarantee from NZ Post, which reduces its legal and binding commitment to support the bank. The rating action is consistent with previous commentary released by Fitch. The removal of the guarantee on 28 February 2017 is the final stage of the transaction, which resulted in a change of shareholders of Kiwi Group Holdings Limited (KGHL), the parent of Kiwibank. NZ Post sold 47% of its holding in KGHL to New Zealand Superannuation Fund (NZ Super) and Accident Compensation Corporation (ACC), which are also sovereign-owned entities. The Stable Outlook reflects the agency's view that no other rating actions are expected following the completion of the transaction. Fitch has maintained Kiwibank's Support Rating (SR) of '1' despite the removal of the guarantee because the agency believes there remains an extremely high likelihood of support from the ultimate owner, the New Zealand sovereign (AA/Stable/F1+). The provisions and structure of the transaction underpin this expectation - the sovereign retains the first right of refusal should NZ Super or ACC wish to sell their stake in KGHL. Additionally, the sovereign has provided KGHL with a long-term NZD300m capital facility to assist the bank. SENIOR DEBT Kiwibank's existing guaranteed senior debt ratings are unaffected by the removal of the guarantee, as the guarantee covers existing liabilities, including deposits, until their final maturity. The ratings of new debt issuances without the benefit of the guarantee will likely be aligned with the relevant IDRs. RATING SENSITIVITIES IDRS, SENIOR DEBT AND SUPPORT RATING Kiwibank's IDRs, Support Rating and non-guaranteed senior debt ratings are sensitive to changes in New Zealand's Long-Term Foreign- and Local-Currency IDRs, and ultimately, the sovereign's ability and propensity to provide timely support to the bank. The rating actions for Kiwibank Limited are as follows: Long-Term Foreign-Currency IDR downgraded to 'AA-' from 'AA'; Outlook Stable Short-Term Foreign-Currency IDR affirmed at 'F1+' Long-Term Local-Currency IDR downgraded to 'AA' from 'AA+'; Outlook Stable Short-Term Local-Currency IDR affirmed at 'F1+' Support Rating affirmed at '1' Guaranteed foreign-currency senior debt affirmed at 'AA' Guaranteed local-currency senior debt affirmed at 'AA+' Commercial paper programme affirmed at 'F1+' Contact: Primary Analyst Jack Do Associate Director +61 2 8256 0355 Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Andrea Jaehne Director +61 2 8256 0343 Committee Chairperson Parson Singha Senior Director +66 2108 0151 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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