SOFIA (Bulgaria), January 29 (SeeNews) – Moody's Investors Service said on Friday it downgraded its rating on OTP Bank's hybrid securities, in line with its revised Guidelines for Rating Bank Hybrids and Subordinated Debt published in November 2009.
In southeastern Europe, OTP Bank has units in Bulgaria, Romania, Serbia, Montenegro and Croatia.
Moody's issued the following statement:
“[...] OTP Bank's Upper Tier 2 perpetual subordinated bond issue was thus downgraded to Ba1 with negative outlook from Baa2. This concludes the review for possible downgrade initiated on 18 November 2009. All other ratings of OTP Bank remain unchanged, together with their negative outlook, in place since 2009.
Prior to the global financial crisis, Moody's had incorporated into its ratings an assumption that support provided by national governments and central banks to shore up a troubled bank would, to some extent, benefit the subordinated debt holders as well as the senior creditors. The systemic support for these instruments has not been forthcoming in many cases. The revised methodology largely removes previous assumptions of systemic support, resulting in today's rating action. In addition, the revised methodology generally widens the notching on a hybrid's rating that is based on the instrument's features.
RATING ACTION IN DETAIL
The starting point in Moody's revised approach to rating hybrid securities is the Adjusted Baseline Credit Assessment (Adjusted BCA). The Adjusted BCA reflects the bank's standalone credit strength, including parental and/or cooperative support, if applicable. The Adjusted BCA excludes systemic support.
The Adjusted BCA for OTP Bank is Baa3 and is the same as the bank's BCA as neither parental nor cooperative support apply.
The Upper Tier 2 perpetual subordinated debt of OTP Bank (ISIN: XS0274147296) was downgraded to Ba1, which is one notch below the bank's Adjusted BCA reflecting its subordinated claim in liquidation and cumulative coupon deferral features.”