MOODY'S ASSIGNS (P)BAA3 PROGRAMME RATING TO MACQUARIE BANK'S 'NON-VIABILITY' SUBORDINATED DEBT.
Summary: The (P)Baa3 rating on MBL's subordinated notes is provisional. Ratings assigned to future drawdowns
Moody's Investors Service has assigned a (P)Baa3 rating to the amended subordinated notes component of Macquarie Bank Limited's (MBL, A2/A2 stable, baa1 stable) existing USD 20 billion Rule 144A/Regulation S Medium-Term Note Programme. The provisional rating is positioned two notches below the baa1 baseline credit assessment of Macquarie.
Moody's expects the terms and conditions of the subordinated notes issued under the programme to allow them to qualify as Tier 2 capital under Basel III.
Going forward, Moody's expects only Basel III-compliant subordinated debt securities to be issued under the programme. There is no impact on the
Baa2 ratings of outstanding Basel II-compliant subordinated notes issued under the programme prior to the amendment.
The medium term note programme's terms and conditions have been revised through changes to the base prospectus and by reference to a supplementary offering memorandum. They now incorporate Basel III-compliant non-viability language, allowing future subordinated note drawdowns to be considered as Tier 2 capital, in accordance with the standards of the Australian Prudential Regulation Authority (APRA) as they will apply at the time of any future issuance. The rating action is based on the combined effect of the base prospectus and the supplementary offering memorandum.
Under the terms and conditions of the offering memorandum, the principal on the Subordinated Notes would be exchanged into ordinary equity of MBL's listed parent, Macquarie Group Limited (MGL, A3 stable), partially or in full, in the event that APRA notifies MBL that it believes that without such exchange the bank would become non-viable, or a public sector injection of capital is necessary because without it the bank would become non-viable.
The (P)Baa3 rating is positioned two notches below MBL's adjusted baseline credit assessment of baa1, in line with Moody's standard notching guidance for subordinated debt with loss triggered at the point of non-viability on a contractual basis. The extra notch relative to the
Baa2 rating of Basel II-compliant subordinated debt reflects the potential uncertainty associated with the timing of loss absorption given that the APRA has not defined the point at which it would deem the bank to be non-viable.
The (P)Baa3 rating on MBL's subordinated notes is provisional. Ratings assigned to future drawdowns will be contingent on their specific terms and conditions, which are expected to be the same as those under the programme, as specified in the offering memorandum.
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|Publication:||EMBIN (Emerging Markets Business Information News)|
|Date:||May 25, 2015|
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