Rating is based on parental support derived from the company's status
Paris, July 04, 2011 -- Moody's Investors Service today assigned to BNP Paribas Securities Services
(BP2S) a backed long-term deposit rating of Aa2 and a backed short-term
deposit rating of Prime-1. Moody's considers that
BP2S' legal status meets the criteria for applying a credit substitution
approach. As such, Moody's has aligned BP2S'
ratings with those of its parent BNP Paribas (Aa2/P-1/B-).
BP2S' Aa2 long-term deposit rating is on review for possible
downgrade, in line with the current review on BNP Paribas,
initiated on 15 June 2011 (See "Moody's places SocGen, CASA,
BNPP on review for possible downgrade" 15 June 2011).
RATINGS RATIONALE
The main element underpinning the credit substitution approach is the
strong legal protection for creditors conferred by the French partnership-like
status, S.C.A. ("société
en commandite par actions"), which renders general partners
jointly and severally liable for the company. BP2S recently changed
its legal status by switching from a limited company-like structure
("société anonyme") to an S.C.A.
structure. Under this new structure, BNP Paribas, as
a direct general partner ("associé commandité"),
is liable for the debts and obligations of the S.C.A..
According to Moody's, the main element underpinning the credit substitution
approach used to rate BP2S in line with its parent is the strong legal
framework provided by the S.C.A. structure.
From a regulatory prospective, the S.C.A. status
is powerful as it renders parental intervention compulsory by law,
in case of default of BP2S. As the sole general partner,
BNP Paribas has an unlimited liability towards BP2S creditors.
Moody's however notes that in the event of the failure of BP2S to
pay its obligations, there is under the French commercial code a
statutory delay of eight days before the resulting claim can be presented
to the general partners. In practice, a creditor can claim
from the general partner 100% of a late payment eight days after
having sent a formal notice to the company. Moody's further
notes that this delay can be extended by decision of the president of
the commercial court, although we believe this would only happen
under exceptional circumstances. Moody's considers this brief
delay to be technical in nature and that interest accrued in this period
would be payable to creditors (albeit at a rate determined by law rather
than under contractual terms). In our view, redemption in
full, including accrued interests, supports the credit substitution
approach outlined above.
For more details on the credit substitution approach, please refer
to our special comment entitled Moody's Identifies Core Principles of
Guarantees for Credit Substitution published in November 2010.
Additionally, Moody's notes the strong operational and financial
linkages that exist between BP2S and its parent. The high degree
of integration with its parent reinforces Moody's expectation of
ongoing support from BNP Paribas.
Looking ahead, we caution that BP2S' Aa2 deposit rating is
currently on review for possible downgrade, in line with its parent's
senior unsecured and deposit ratings. Consequently, a downgrade
of BNP Paribas' deposit rating, would trigger a downgrade of BP2S'
deposit rating. A downgrade could also be triggered by any event
resulting in a lower assessment by Moody's of the probability of support
from its parent BNP Paribas, most notably through a change in the
legal status of BP2S or the composition of its partnership.
BP2S is a global player in the custody and asset servicing industry.
Being part of BNP Paribas' Investment Solutions business line,
BP2S principally conducts global custody, fund administration,
cash financing, securities lending and borrowing, and collateral
management activities. Established in France as a subsidiary of
BNP Paribas, the bank ranks 5th worldwide in the custodian industry
with $6.2 trillion of asset under custody (at end-2010),
$1 trillion of asset under administration and over 6,329
funds administered as at end-December 2010.
Based in Paris, France, BP2S reported consolidated assets
of EUR87 billion at year end-2010 and a net income group share
of EUR70 million for the year.
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 rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
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Moody's assigns backed Aa2 long-term deposit rating to BNP Paribas Securities Services