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Global Credit Research - 02 Jun 2010
London, 02 June 2010 -- Moody's Investors Service today affirmed all outstanding ratings of both
Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B)
following the tender offer for the repurchase of some of the subordinated
securities issued by these two institutions.
Moody's said that NRAM has proposed a cash tender offer for five
out of six of its Upper Tier 2 instruments with a book value of approximately
GBP1,122 million at a discount to par. Any take up of
the offer will create an immediate accounting gain that will in effect
increase core tier 1. Moody's notes that the Aa3/P-1/stable
ratings of NRAM's senior debt are based on the government guarantee
and are thus not affected by this transaction. Although the ratings
of its lower tier 2 debt at Ca with a negative outlook are not directly
affected by the cash offer or the government guarantee, Moody's
has also affirmed this rating as it still incorporates a heightened risk
of loss absorption of this wind-down entity due to its junior status
in the capital structure of NRAM. The C/stable ratings of junior
subordinated debt incorporate our expectation of lower recovery for these
instruments relative to lower tier 2 securities because their coupons
have been suspended indefinitely and that they are fully loss absorbing
while NRAM is in receipt of State Aid.
Moody's last rating action on Northern Rock Asset Management was on January
11, 2010 when the senior ratings for NRAM were upgraded to Aa3 from
Headquartered in Newcastle-upon-Tyne, Northern Rock
Asset Management had total assets of GBP75.6 billion as of
Bradford & Bingley
Moody's added that B&B has proposed a cash offer for most of
its Lower Tier 2 as well as its Upper Tier 2 securities with a book value
of GBP1,150 million. Similarly to NRAM, Moody's
said that because of the discounted price, the take up of this offer
by investors will create a higher level of core tier 1 for B&B.
However, this transaction does not change the financial fundamentals
of B&B and as such all ratings assigned to B&B remain unchanged.
The A2 senior debt ratings of B&B which are based on the strength
of the government guarantee are on review for possible upgrade pending
the release of the full details and terms of the government guarantee
which has already been approved by the European Commission. The
short term debt ratings of P-1 also remain unchanged. The
bank's subordinated, junior subordinated and preference shares
do not benefit from the government guarantee and are rated C with a stable
outlook and reflect our expectation of the amount of losses embedded in
the assets of B&B which are to satisfy these obligations after all
other secured and more senior unsecured obligations have been paid.
As such, Moody's believes that there will be only a limited recovery
for the holders of these instruments. Moody's notes that
coupon and principal payments have been suspended on all B&B's
subordinated instruments, but B&B will continue to make payments
under its guarantee of the GBP150,000,000 6.462%
Guaranteed Non-voting Non-cumulative Perpetual Preferred
issued by Bradford & Bingley Capital Funding LP.
Moody's last rating action on Bradford & Bingley was on June 08,
2009 when the senior long term and short term ratings were upgraded to
A2/P-1, and the long term ratings were put on review for
Bradford & Bingley is headquartered in Bingley, Yorkshire,
and had assets of GBP49 billion as of year-end 2009.
The principal methodologies used in rating these issuers were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the ratings Methodologies Sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating these issuers can also be found in
the Rating Methodology Sub-directory on Moody's website.
Please refer to www.moodys.com for further details on the
ratings of these instruments.
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms ratings of NRAM and B&B following the cash offer
No Related Data.
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