Hong Kong, January 20, 2014 -- Moody's Investors Service, ("Moody's") has
assigned a Baa2 (hyb) rating to Dah Sing Bank's proposed subordinated
notes with contractual point of non-viability (PONV) loss absorption
features. The notes mature in January 2024, and are callable
by the bank after the first five years. This is the first time
Moody's has assigned a rating to a Basel III-compliant subordinated
debt instrument issued by a Hong Kong bank.
The subordinated notes with PONV loss absorption features are rated two
notches below Dah Sing Bank's a3 adjusted baseline credit assessment
(BCA). The rating outlook is negative, in line with the negative
outlook for the bank.
The rating is subject to the receipt of final documentation, the
terms and conditions of which are not expected to change in any material
way from the draft documents that Moody's has reviewed.
Moody's has also assigned a (P)Baa2 rating for subordinated obligations
under the $2 billion MTN programme of Dah Sing Bank, Dah
Sing MTN Financing Limited, and Dah Sing SAR Financing Limited.
Going forward, Moody's expects all subordinated debt securities
issued under the programme will be Basel III-compliant.
There is no impact on the Baa1 ratings of outstanding Basel II-compliant
subordinated notes issued under the programme prior to the amendment of
the program documents.
RATINGS RATIONALE
The MTN programme's conditions have been revised to incorporate
Basel III-compliant PONV language, allowing future subordinated
debt drawdown to be considered as Tier 2 capital.
Under the programme's terms, the Hong Kong Monetary Authority
(HKMA) has discretion to determine the point at which the bank is non-viable.
The principal on these capital securities would be written down,
partially or in full in the event that the HKMA notifies the bank that
without such write-off, the bank would become non-viable
or it decides to make a public sector injection of capital without which
the bank would become non-viable.
In line with Moody's standard notching guidance for subordinated
debt with contractual non-viability loss-absorption language,
the assigned ratings are positioned two notches below Dah Sing Bank's
a3 adjusted BCA. The rating for the bank's contractual PONV
subordinated debt is one notch below that of the bank's plain vanilla
subordinated debt. The additional notching reflects the potential
uncertainty associated with the timing of the loss absorption of the contractual
PONV subordinated debt.
The (P)Baa2 rating on the MTN programme subordinated obligations of Dah
Sing Bank, Dah Sing MTN Financing Limited, and Dah Sing SAR
Financing Limited is provisional. Ratings assigned to future drawdowns
will be contingent upon their specific terms and conditions, which
are expected to be the same as those under the programme.
Technically, the (P)Baa2 rating is a downgrade from the prior (P)Baa1
rating assigned to Basel II-compliant subordinated obligations
under the programme.
Dah Sing Bank's other ratings remain unaffected. The ratings
are as follows:
Dah Sing Bank, Limited:
- BCA/Adjusted BCA: a3/a3
- Bank Financial Strength Rating: C
- Local and foreign currency long-term/short-term
deposits: A3/P-2
- Foreign currency senior unsecured: A3
- Foreign currency senior unsecured MTN: (P)A3
- Foreign currency subordinated debt: Baa1
- Foreign currency junior subordinated: Baa2 (hyb)
- Foreign currency junior subordinated MTN: (P)Baa2
The outlook for all ratings is negative
Dah Sing MTN Financing Limited:
- Local currency backed senior unsecured MTN: (P)A3
- Local currency backed junior subordinated MTN: (P)Baa2
The outlook for all ratings is negative
Dah Sing SAR Financing Limited:
- Local currency backed junior subordinated MTN: (P)Baa2
The outlook for all ratings is negative
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Global Banks published
in May 2013. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Dah Sing Bank is headquartered in Hong Kong and reported total assets
of HKD161 billion ($21 billion) at end-June 2013.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Sonny Hsu, CFA
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's assigns Baa2 (hyb) rating to Dah Sing Bank's contractual non-viability subordinated debt