Moody's upgrades Commerzbank Capital Funding Trust II to Ba2 from B1(hyb).
Moody's Investors Service has today
upgraded to Ba2 from B1(hyb) the subordinated instrument issued by
Commerzbank Capital Funding Trust II (XS0248611047). The upgrade and the
removal of the hybrid (hyb) indicator from this rating follows an
announcement by Commerzbank AG (Commerzbank, deposits B1 stable, BFSR
D+/BCA ba1 stable) on 16 January 2014 that it has restructured the
non-cumulative Trust Preferred Security into a Trust Lower Tier 2 (Trust
LT2) Security. The outlook on the Ba2 rating is stable, in line with the
outlook on Commerzbank's other rated obligations.
Commerzbank's announcement follows a court decision on 16 July 2013 of
the Chancery Court of the State of Delaware, ruling that holders of
instruments issued by Commerzbank Capital Funding Trust II should be
treated pari passu with holders of the restructured Silent Partnership
Certificates issued by Dresdner Funding Trust IV (Dresdner FT IV) which
Moody's rates Ba2 stable.
Concurrently, Moody's affirmed the B1(hyb) ratings for the securities
issued by Commerzbank Capital Funding Trust I and III (DE000A0GPYR7,
DE000CK45783), and changed the outlook for these ratings to positive
from stable. The positive outlook reflects Moody's view that there may
be positive implications from the Delaware court decision for holders of
All other ratings of Commerzbank group are unaffected by today's rating
Moody's two-notch upgrade of the restructured Trust LT2 of Commerzbank
Capital Funding Trust II to Ba2, and the removal of the hybrid indicator
from this rating, was prompted by the communication of Commerzbank (on 16
January 2014) that it has amended the documentation of this instrument.
The amendment entails (1) the removal of the coupon skip triggers from
the documentation; and (2) the elevation to Lower Tier 2 ranking (from
Tier 1) in liquidation. As a consequence, the risk profile of these
instruments closely resembles that of senior subordinated (Lower Tier 2)
debt issued by Commerzbank AG, which is rated one notch below
Commerzbank's adjusted baseline credit assessment (adjusted BCA) of ba1.
Commerzbank made the amendment in consideration of a court ruling on 16
July 2013 which requires the bank to elevate the respective securities
to the same Lower Tier 2 capital class as is applicable for the
instruments issued by Dresdner FT-IV, and to remove the profit-dependent
The affirmation and outlook change to positive from stable of Commerzbank
Capital Funding Trust I and III reflects Moody's assumption that
Commerzbank may decide to treat holders of instruments of the three
Funding Trusts the same, implying that Commerzbank Capital Funding Trust
I and III may be restructured in a similar fashion at a later date.
This, in turn, is based on (1) the Delaware court ruling; and (2)
Moody's understanding that investors in the two Trusts not subject to the
ruling may have similar rights of treatment as investors in Capital
Funding Trust II. However, Commerzbank Capital Funding Trust I and III
are only indirectly affected, if at all, and will not necessarily be
subject to court decisions in the future, although Moody's notes that the
securities of Commerzbank Capital Funding Trust I are the subject of
currently pending litigation in Delaware.
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|Publication:||EMBIN (Emerging Markets Business Information News)|
|Date:||Jan 21, 2014|
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