Announcement follows share-purchase agreement signed by Burgan Bank and EFG Eurobank Ergasias
NOTE: On April 26, 2012, the press release was revised as follows: In the headline, correct “Ba3 ratings” to “Ba3 GLC deposit rating”; Correct “deposit rating” to “GLC deposit rating” in the text. Revised release follows.
Frankfurt am Main, April 13, 2012 -- Moody's Investors Service has today changed the review placement to direction
uncertain from review for downgrade on Eurobank Tekfen A.S.'s
Ba3 global local currency (GLC) deposit rating. This follows the share-purchase agreement
entered into on 9 April 2012 between Burgan Bank SAK (A3/P-2/D+,
stable) and EFG Eurobank Ergasias (Caa2/NP/E, negative) to acquire
a majority stake at Eurobank Tekfen. Moody's understands
that the share-purchase agreement will be finalised during Q3 2012.
Eurobank Tekfen's other ratings are unaffected by this announcement.
More specifically, Moody's has maintained the review for downgrade of Eurobank Tekfen's D- bank financial strength rating (BFSR), mapping to ba3 on the long-term scale, and its Ba3 foreign currency deposit rating.
RATINGS RATIONALE
-- CHANGE TO REVIEW WITH DIRECTION UNCERTAIN FROM REVIEW
FOR DOWNGRADE
Currently, Eurobank Tekfen's GLC deposit rating does not benefit
from any rating uplift from its lower-rated current majority shareholder,
EFG Eurobank Ergasias. During the review, Moody's will assess
its assumptions about external support for Eurobank Tekfen, in particular
the availability of parental and systemic support, in case of need.
Support assumptions can lead to a bank's issuer and deposit ratings being positioned higher than their standalone credit assessments under Moody's joint-default analysis (JDA).
Moody's assessment of a low probability of systemic support for
Eurobank Tekfen is based on the bank's very limited size and importance
to the domestic financial system in Turkey, and does not result
in any rating uplift to the bank's GLC deposit rating from its standalone
credit strength.
However, if the potential ownership change results in the higher-rated
Burgan Bank being a majority shareholder, Moody's external
support assumption is likely to result in rating uplift for Eurobank Tekfen's
GLC deposit rating from its standalone credit strength. As a result,
upon conclusion of the review, and if the share purchase by Burgan
is realised, Moody's expects the GLC deposit rating to be positioned
at least at its current level of Ba3 or slightly above that level.
Should the current ownership structure continue, however,
Moody's would likely downgrade the GLC deposit rating, as outlined
in the press release "Moody's reviews Eurobank Tekfen's D-/Ba3
ratings for downgrade" issued on 30 March 2012. To reflect
the possibility of a near-term ownership change with potentially
positive credit implications for our support assumptions, the review
of the bank's GLC deposit ratings has been changed to direction uncertain
from review for downgrade previously.
-- FOCUS OF THE REVIEW OF THE BFSR
During the review Moody's will focus on the extent of Eurobank Tekfen's
weak profitability and moderate asset-quality trends, which
could experience further downward pressure on the back drop of slower
economic growth expected in 2012, in line with Moody's expectations
for the system. Furthermore, Moody's will assess the
strategic uncertainties and possible franchise evolution that Eurobank
Tekfen might experience, depending on whether the ownership change
goes through. In Moody's view, the benefits of a successful
collaboration under new ownership -- including synergies
that could reflect positively on Eurobank Tekfens' franchise --
would only materialise over the medium term.
Moody's assumption is that subsidiaries are always likely to be partially
affected by changes in parents' creditworthiness. As a result,
in the absence of the share purchase, Moody's will analyse the positioning
of Eurobank Tekfen's standalone credit assessment relative to its parent's
standalone profile. Moody's analysis will take into account
(i) the degree of interlinkage between the parent and the subsidiary;
(ii) the extent to which a possible default of the parent bank might have
credit-negative implications for Eurobank Tekfen's credit profile
and franchise; and (iii) regulatory barriers in Turkey that restrict
EFG Eurobank Ergasias from using -- at its discretion --
Eurobank Tekfen's resources.
-- WHAT COULD MOVE RATINGS UP/DOWN
Majority ownership from a higher-rated shareholder are likely to
result in Eurobank Tekfen's GLC deposit rating being positioned at least
at its current level or even slightly above that level, depending
on Moody's assumptions of potential future parental support in case
of need.
There is no upward pressure on the standalone profile of Eurobank Tekfen,
captured by the ongoing review for downgrade on its BFSR. The most
important downward rating drivers continue to be (i) the strategic and
operational uncertainty related to a change in ownership; (ii) continued
weakening in Eurobank Tekfen's core earnings base, effecting its
internal capital generation; (iii) reduction in the overall capital
levels, constraining its franchise expansion; (iv) any deterioration
in the funding profile coupled with an increase in non-performing
loans; and (v) liquidity and capital pressures faced by the current
parent bank that could have adverse implications for Eurobank Tekfen's
standalone profile.
PRINCIPAL METHODOLOGIES
The 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: 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, and public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
this review.
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uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
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the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Arif Bekiroglu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
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 Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's changes review of Eurobank Tekfen's Ba3 GLC deposit rating to direction uncertain
