August 7 (SeeNews) - Fitch Ratings said it has placed the Long Term Issuer Default Ratings (IDRs) and Support Ratings of '1' of Bulgaria's Societe Generale Expressbank and its leasing subsidiary Sogelease on Rating Watch Negative (RWN).
"This follows the announced sale of the institutions by their ultimate parent Societe Generale (SocGen, A/Stable) to DSK Bank EAD (DSK), a Bulgarian subsidiary of OTP Bank Plc (OTP)," Fitch Ratings said in a statement on Monday.
You can subscribe to our M&A newsletter here
Last week, OTP said it has signed agreements to buy majority stakes in Albanian and Bulgarian units of French banking group Societe Generale. In Bulgaria, OTP will acquire 99.74% of Societe Generale Expressbank and other local subsidiaries held by the Bulgarian unit of the French banking group, while in Albania it will purchase 88.89% of Banka Societe Generale Albania, OTP said.
The Viability Rating of Expressbank is unaffected by the rating action, Fitch Ratings said.
Fitch Ratings also said in the statement:
"KEY RATING DRIVERS
IDRS, SUPPORT RATINGS
The IDRs and Support Ratings of Expressbank and Sogelease are driven by support available from SocGen. The RWN reflects Fitch's expectation of a multi-notch downgrade following the acquisition by DSK, based on Fitch's view of the new ultimate parent's weaker ability, relative to SocGen, to provide support to Expressbank and its leasing subsidiary. Fitch expects that following the successful completion of the transaction and resolution of the RWN the IDRs of Expressbank and Sogelease will be downgraded to a 'BB' range.
On 2 August 2018 SocGen agreed to sell the majority stake in Expressbank to DSK Bank. The transaction will also include Sogelease (100% owned by Expressbank), Expressbank's factoring subsidiary, Regional Fund for Urban Development (51% owned by Expressbank) and SocGen's Bulgarian insurance subsidiary. The transaction is subject to regulatory approval and is expected to be completed in 4Q18.
RATING SENSITIVITIES
IDRS, SUPPORT RATINGS
We expect to resolve the RWN following a successful completion of the transaction. If the transaction fails to complete we will resolve the RWN and take rating action based on our review of SocGen's propensity to support Expressbank and Sogelease.
The rating actions are as follows:
Expressbank
Long-Term IDR: 'A-' placed on RWN
Short-Term IDR: 'F1' placed on RWN
Support Rating: '1' placed on RWN
Viability Rating: 'bb' unaffected
Sogelease
Long-Term IDR: 'A-' placed on RWN
Short-Term IDR: 'F1' placed on RWN
Support Rating: '1' placed on RWN"