September 26, 2012 / 12:10 PM / 5 years ago

TEXT-Fitch assigns Erste's tier 2 issue expected 'BBB+(EXP)' rating

(The following statement was released by the rating agency)

Sept 26 - Fitch Ratings has assigned Erste Group Bank AG's (Erste; 'A'/Stable/'F1') USD500m subordinated Tier 2 notes an expected rating of 'BBB+(EXP)'.

The final rating is contingent on the receipt of final documents conforming to information already received.

The notes will be issued directly by Erste and will have a 5.5-year issuer call option and a 10.5-year maturity.

To ensure continued regulatory recognition as Tier 2 capital, the documentation of the notes (in the "risk factors") makes reference to potential statutory loss absorption once the point of non-viability for the issuer has been reached. This is in line with the ongoing implementation of Basel III requirements in the European Union.

The notes are rated one notch below Erste's 'a-' Viability Rating (VR), in accordance with Fitch's criteria for "Rating Bank Regulatory Capital and Similar Securities" (published 15 December 2011). Under these criteria, Basel III-compliant Tier 2 notes with point of non-viability language and no coupon deferral flexibility in a going-concern scenario are notched down once from the VR to reflect potential loss severity relative to average recoveries.

As the notes do not have any interest deferral features, no additional notches for non-performance risk have been applied.

The rating of the notes is notched from Erste's VR and therefore the rating is sensitive to any changes in Erste's VR. The notes are rated in line with Erste's outstanding lower Tier 2 notes.

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