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Fitch Assigns NN Group's EUR850m Notes 'BBB' and EUR500m Notes 'A-' Ratings
January 12, 2017 / 4:50 PM / a year ago

Fitch Assigns NN Group's EUR850m Notes 'BBB' and EUR500m Notes 'A-' Ratings

(The following statement was released by the rating agency) LONDON, January 12 (Fitch) Fitch Ratings has assigned NN Group N.V.'s (NN) EUR850m dated subordinated notes a 'BBB' rating and EUR500m senior unsecured notes a 'A-' rating. The subordinated notes have been rated three notches below NN's 'A' Issuer Default Rating (IDR), reflecting two notches for the level of subordination and one notch for 'moderate' non-performance risk. The senior unsecured notes have been rated one notch below NN's IDR reflecting below average recovery prospects for debt issued out of holding companies. KEY RATING DRIVERS Both issues have been issued by NN under its EUR3bn debt issuance programme. The proceeds will be used for the repayment of existing NN Group debt and for general corporate purposes. The subordinated notes have been issued with a fixed coupon of 4.625% with term to maturity of 31 years but are callable after 11 years. If the issue is not called at the first call date on 13 January 2028, the coupon will reset from fixed to floating rate of EURIBOR + 4.95%, representing a step-up of 100bps. This issue ranks pari passu with all subordinated obligations of NN except for those preferred by mandatory provisions of law and those that rank or expressed by their terms to rank junior or senior. The level of subordination is reflected in Fitch's baseline recovery assumption of 'poor' for the issue. The subordinated notes include a mandatory interest deferral feature, which would be triggered if the company is not able to meet the applicable solvency capital requirement, the applicable minimum capital requirement or any applicable capital requirement enforced by the relevant supervisory authority with respect to NN. Under the agency's methodology, Fitch regards this feature as leading to 'moderate' non-performance risk. Fitch expects the subordinated notes to qualify for Tier 2 regulatory capital recognition under Solvency II. The notes receive 100% equity credit in Fitch's Prism Factor-Based Model, due to the application of regulatory override. However, given that they are a dated instrument, the notes are treated as 100% debt in Fitch's financial debt leverage calculation. The senior unsecured notes have been issued with a fixed coupon of 0.875% with term to maturity of six years. Fitch's baseline recovery assumption for the senior notes is 'below average' for the issue given deeper effective subordination due to issuance by the holding company. Fitch views the issue as neutral for NN's financial debt leverage, fixed charge coverage and capital adequacy, as new notes have been issued for refinancing purposes. The issue will lengthen the maturity profile of the group's financial debt. Moreover, in Fitch's view, the issue underlines NN's strong financial flexibility. RATING SENSITIVITIES The notes' ratings are subject to the same sensitivities that may affect NN's Long-Term IDR (for more details, see 'Fitch Affirms NN Group at 'A+'; Outlook Stable' dated 2 December 2016 at Fitch currently rates NN as follows: - Insurer Financial Strength ratings of core insurance entities: 'A+'; Outlook Stable - IDR of NN Group N.V.: 'A'; Outlook Stable Contact: Primary Analyst Willem Loots Director +44 20 3530 1808 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson David Prowse Senior Director +44 20 3530 1250 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: Date of relevant rating committee: 1 December 2016 Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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