Upgraded ratings reflect the application of a credit substitution approach following the takeover of Friesland Bank N.V. by Rabobank Nederland
Paris, April 12, 2012 -- Moody's has today withdrawn the standalone bank financial strength
rating (BFSR) of Friesland Bank N.V. (Friesland) of C-,
mapping to baa2 on the long-term scale, which was under review
for downgrade. At the same time, the rating agency has also
upgraded the long-term deposit and senior unsecured ratings to
Aaa (backed) from A3, the dated subordinated debt rating to Aa1
(backed) from Baa1 and the rating on the Non-Cumulative Preferred
Stock to A1 (hyb) from Ba1 (hyb). The short-term deposit
and debt ratings were also upgraded to Prime-1 (backed) from Prime-2.
All long-term ratings remain under review for downgrade,
while the short-term rating is no longer under review for downgrade.
The rating action follows the acquisition by Rabobank Nederland (Rabo
-- rated Aaa under review for downgrade/B+ under review for
downgrade/Prime-1) of 100% of Friesland as of April 1,
2012, and the subsequent issuance of a so-called 403 declaration
by which Rabo assumed joint and several liability for the debts arising
from any legal acts of Friesland.
RATINGS RATIONALE
WITHDRAWAL OF STAND-ALONE BANK FINANCIAL STRENGTH RATING
The decision to withdraw Friesland's standalone bank financial strength
rating is driven by Rabo's decision to merge Friesland's assets
with those of its local member Rabobanks within the next two years.
Moreover, following the issuance of the 403 declaration by Rabo,
Friesland will be exempted from publishing its financial statements in
accordance with the normal provisions of the Dutch Civil Code.
Furthermore Friesland will no longer be required to comply with prudential
regulations on a solo basis, which will deprive the rating agency
of some critical information. These facts mean that an assessment
of Friesland's standalone creditworthiness will be both impractical
and of limited meaning.
UPGRADE OF LONG-TERM AND SHORT-TERM DEPOSIT AND DEBT RATINGS
The decision to upgrade Friesland's long-term and short-term
deposit and debt ratings is primarily driven by the issuance of the 403
declaration by Rabo, which is based on Article 2:403 of the
Dutch Civil Code. In such a declaration the parent company assumes
joint and several liability for any debts arising from the legal acts
of an affiliated company. The affiliate is then exempted from publishing
annual accounts of its liabilities. To maintain the exemption,
annual consent from the shareholders is required.
The support commitment resulting from the issuance of a 403 declaration
does not legally constitute a guarantee of Friesland's debts,
as it is not irrevocable and does not provide for timely payment.
Instead it allows creditors to pursue the provider of the declaration
in court for payment. However, Moody's believes that
Rabo's strategic business plans for Friesland demonstrate a strong
intent to fully support Friesland's financial obligations.
This is evidenced by Rabo's intention to merge Friesland's
activities into its local member Rabobanks within a very tight timetable,
which will result in the extinction of Friesland as a legal entity.
Furthermore we would expect considerable regulatory pressure to support
Friesland before any potential default. We note that a 403 declaration
can be revoked, but existing creditors prior to the revocation would
continue to benefit from the protection it affords. Friesland's
long-term and short-term ratings have therefore been upgraded
to the same level as equivalent classes of debt issued by its new owner,
Rabo.
UPGRADE OF NON-CUMULATIVE PREFERRED STOCK RATING
EUR125 mn Non-Cumulative Preferred Securities are accounted as
equity and as such are excluded from the scope of the joint and several
liability arising from the 403 declaration by Rabo, which covers
liabilities. Nonetheless, as stated above, Moody's
believes that Rabo demonstrates a strong intent to fully support Friesland.
As a consequence, the rating on Friesland's EUR125 mn Non-Cumulative
Preferred Stock have been upgraded to A1 (hyb), from Ba1 (hyb),
i.e. two notches below Rabo's standalone baseline
credit assessment of aa2. The rating remains under review for downgrade,
mirroring the review on Rabo's BFSR.
The instruments are rated two notches below Rabo's standalone credit
profile to reflect (i) their deeply subordinated claim in liquidation;
(ii) the cumulative characteristics of the instrument (with an Alternative
Coupon Settlement Mechanism); and (iii) the existence of optional
and mandatory deferral triggers.
KEY RATING SENSITIVITIES
Given the current review for downgrade on all long-term ratings,
an upgrade is unlikely.
Conversely, Friesland's ratings would be downgraded in the
event of a downgrade of the ratings on Rabo's similar classes of
debt and deposits. Friesland's ratings could also be downgraded
should Moody's perception of Rabo's intent to fully support
be altered.
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were Bank Financial Strength Ratings:
Global Methodology published in February 2007, and Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: Global
Methodology published in March 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare the ratings are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Stephane Herndl
Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's -- Friesland Bank's standalone financial strength rating withdrawn, LT and ST ratings upgraded
