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30 Mar 2011
Moscow, March 30, 2011 -- Moody's Investors Service has today assigned an A2 long-term
global local currency (GLC) debt rating with a negative outlook to the
upcoming local currency senior secured debt instrument that will be issued
by Bank DeltaCredit ("DeltaCredit", rated Baa2/Prime-2/D,
- RUB5 billion Series 08-IP Senior Secured Regular Bond
with a maturity of 1,820 days
The debt issue is secured by a pool of mortgage loans and benefits from
an explicit and irrevocable guarantee provided by Société
Générale Group (rated Aa2/Prime-1/C+,
negative outlook). The latter owns a 74.89% stake
in DeltaCredit's immediate parent, Rosbank (rated Baa3/Prime-3/D,
positive outlook), which, in turn, controls 100%
of DeltaCredit. The assigned debt rating carries a negative outlook,
which is in line with the negative outlook on the guarantor's rating.
Moody's explains that DeltaCredit's assigned debt rating is
in line with Société Générale's Baseline
Credit Assessment (BCA) of A2, which is based on the latter's
C+ bank financial strength rating (BFSR). The new rating carries
a negative outlook, which is in line with the negative outlook on
Société Générale's BFSR. Moreover,
the rating is not constrained by Russia's local currency debt ceiling
The bonds are being issued in accordance with the Russian legislation
on mortgage-backed securities. The terms and conditions
of the issue provide for semi-annual coupon payments, with
the coupon rate to be defined by the issuer with reference to market conditions.
The bond issue may incorporate a put option. Moody's notes
that the deal structure does not provide for the allocation of the bonds
by senior and/or junior tranches.
Moody's further explains that the A2 rating assigned to DeltaCredit's
bonds is underpinned by an explicit and irrevocable guarantee issued by
Société Générale Group, covering both
the principal and coupon payments due on the bonds. The rating
agency adds that it has given limited consideration to the underlying
collateral pool of the bond issue being rated; therefore, the
ratings for the mortgage-secured bonds are based on the fundamental
credit quality of the issuer (DeltaCredit) and guarantor (Société
Générale). As a result, the A2 rating assigned
by Moody's to DeltaCredit's mortgage-secured bonds
is in line with Société Générale's BCA
If the obligations under the bond issue are not honoured in full by the
issuer and/or the guarantor, the claims of the bondholders will
be imposed on the mortgage collateral. Moody's understands
that the claims of the bondholders for any remaining amount that is not
covered in full by the proceeds of the respective mortgage collateral
will continue to rank pari passu with other senior unsecured creditors.
According to Moody's, DeltaCredit's BFSR of D --
mapping to a BCA of Ba2 -- is underpinned by (i) its visible position
in the Russian mortgage market; (ii) its strict approach to credit
underwriting and modest risk appetite, resulting in satisfactory
asset quality to date; (iii) its good financial performance and favourable
cost efficiency metrics; and (iv) adequate economic capitalisation,
while future capitalisation prospects are backed by the financial power
of Société Générale.
At the same time, Moody's cautions that DeltaCredit's
stand-alone ratings are constrained by (i) the bank's still
modest franchise value and the limitations on further expansion of the
Russian mortgage market in the foreseeable future, as a result of
the current volatile economic conditions; (ii) the elevated --
compared to the normal economic cycle -- level of problem loans pending
resolution through court proceedings and the repossession of mortgage
properties; and (iii) the high dependence of its business model on
funding from the parent, coupled with the lack of alternative sources
of long-term financing.
DeltaCredit's long-term deposit rating of Baa2 (with negative
outlook) benefits from a three-notch uplift from the bank's
BCA of Ba2, in line with Moody's assessment of the very high
probability that the bank's ultimate parent -- Société
Générale -- will provide support to its Russian subsidiary
in case of distress. DeltaCredit's short-term local
currency deposit rating of Prime-2 is mapped from the bank's
long-term GLC deposit rating. No systemic support is factored
into the bank's ratings.
PREVIOUS RATING ACTION & METHODOLOGY USED
Moody's previous rating action on DeltaCredit was the assignment
of A2 long-term global local currency debt ratings with a negative
outlook to the bank's two planned issues of senior secured regular
bonds -- the RUB5 billion Series 06 and the RUB5 billion Series 07
-- each with a maturity of 1,820 days.
The principal methodologies used in this rating were Bank Financial Strength
Ratings: Global Methodology published in February 2007, and
Incorporation of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology published in March 2007.
Headquartered in Moscow, Russia, DeltaCredit reported --
under local GAAP (unaudited) -- total assets of RUB53.0 billion
as at 31 December 2010 and net profits of RUB1.9 billion.
Information sources used to prepare the credit rating 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Asst Vice President - Analyst
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Eastern Europe LLC
Moody's assigns A2 to DeltaCredit's planned series 08-IP senior secured debt issuance; negative outlook (Russia)
7th floor, Four Winds Plaza
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Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
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© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
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