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25 Feb 2010
Approximately $2.9 billion of outstanding hybrids affected
Paris, February 25, 2010 -- Moody's Investors Service downgraded its ratings on most of the hybrid
securities issued Fortis Bank SA/NV (Fortis Bank), in line with
its revised Guidelines for Rating Bank Hybrids and Subordinated Debt published
in November 2009. Moody's downgraded Fortis Bank's perpetual debt
securities cumulative - through Alternative Coupon Settlement Mechanism
(ACSM) - to Baa3 from Baa1 as well as Fortis Luxembourg Finance's
perpetual junior subordinated securities to Baa2 from A3. Fortis
Bank's perpetual junior subordinated securities' rating was
confirmed at A3. At the same time, Moody's downgraded
Fortis Bank, Fortis Luxembourg Finance, Fortis Bank New York
and Fortis Bank Cayman Islands' ratings on their junior subordinated
programs to Baa2 from A3. This concludes the review for possible
downgrade that began on November 18, 2009. The outlook on
the Bank Financial Strength Ratings (BFSR) for Fortis Bank and BGL BNP
Paribas remains negative.
Prior to the global financial crisis, Moody's had incorporated into
its ratings an assumption that support provided by national governments
and central banks to shore up a troubled bank would, to some extent,
benefit the subordinated debt holders as well as the senior creditors.
The systemic support for these instruments has not been forthcoming in
many cases. The revised methodology largely removes previous assumptions
of systemic support, resulting in today's rating action.
In addition, the revised methodology generally widens the notching
on a hybrid's rating that is based on the instrument's features.
RATING ACTION IN DETAIL
The starting point in Moody's revised approach to rating hybrid
securities is the Adjusted Baseline Credit Assessment (Adjusted BCA).
The Adjusted BCA reflects the bank's standalone credit strength,
including parental and/or cooperative support, if applicable.
The Adjusted BCA excludes systemic support.
The Adjusted BCA is Baa1 for Fortis Bank and BGL BNP Paribas and includes
some uplift for parental support from BNP Paribas (rated Aa2/P1/B-/stable).
The perpertual debt securities (ISIN: BE0119807122 and BE0117584202)
issued by Fortis Bank were downgraded to Baa3. The two notches
differential with the Adjusted BCA reflects the instrument's deeply
subordinated claim in liquidation and coupon deferral mechanism,
which is mandatory although subject to a dividend pusher. Any unpaid
coupons are cumulative and must be settled through an alternative coupon
settlement mechanism (ACSM).The outlook on these perpetual debt
securities is negative.
Moody's confirmed Fortis Bank's rating on its perpetual junior
subordinated securities rating (ISIN: BE0934549511) at A3.
The instruments' deeply subordinated claim in liquidation and its
coupon deferral mechanism, which is mandatory subject to minimal
solvency requirements, are fully captured by the current ratings.
Moody's downgraded Fortis Luxembourg Finance perpetual junior subordinated
securities ratings (ISIN: XS0071344799 and XS0063913387) to Baa2
from A3. The one notch differential with the Adjusted BCA is due
to its junior subordinated claim in liquidation, cumulative deferral
features and to its coupon deferral mechanism, which is optional.
Moody's lowered Fortis Bank, BGL BNP Paribas, Fortis
Luxembourg Finance, Fortis New York and Fortis Bank Cayman Islands'
junior subordinated program ratings to Baa2 from A3 which is one notch
below the adjusted BCA. This takes account the program's
junior subordinated claim in liquidation and the potential option of the
issuer to defer interest payments on a cumulative basis.
The following ratings have been downgraded and assigned a negative outlook:
- Fortis Bank SA/N.V -- EUR 1billion 4.625%
Perpetual Debt Securities (ISIN: BE0119807122) to Baa3 from Baa1
- Fortis Bank SA/N.V -- EUR 1 billion 6.5%
Perpetual Debt Securities (ISIN: BE0117584202) to Baa3 from Baa1
- Fortis Luxembourg Finance -- JPY5 billion perpetual junior
subordinated securities (ISIN: XS0071344799) to Baa2 from A3
- Fortis Luxembourg Finance -- USD 35million perpetual junior
subordinated securities (ISIN: XS0063913387) to Baa2 from A3
- Fortis Bank SA/NV junior subordinated program ratings to Baa2
- BGL BNP Paribas junior subordinated program rating to Baa2 from
- Fortis Luxembourg Finance junior subordinated program rating
to Baa2 from A3
- Fortis Bank New York junior subordinated program rating to Baa2
- Fortis Bank Cayman Islands junior subordinated program rating
to Baa2 from A3
The following ratings have been confirmed and assigned a negative outlook:
- Fortis Bank SA/N.V -- EUR75 million Perpetual junior
subordinated securities (ISIN: BE0934549511) at A3
PREVIOUS RATING ACTIONS AND MOODY'S METHODOLOGIES
The previous rating action on Fortis Bank and its subsidiaries was on
18 November 2009, when Moody's placed Fortis Bank' Baa1 preferred
securities and Fortis Bank's subsidiaries A3 junior subordinated
ratings on review for possible downgrade.
The principal methodologies used in rating Fortis Bank and BGL BNP Paribas
were Moody's "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, Moody's Guidelines for Rating Bank Hybrid
Securities and Subordinated Debt published November 17, 2009,
which are available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Please visit www.moodys.com to access the following documents
for additional information:
Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated
Debt -- November 17, 2009
Frequently Asked Questions: Moody's Guidelines for Rating Bank Hybrid
Securities and Subordinated Debt -- November 17, 2009
Headquartered in Brussels, Fortis Bank SA/NV had total assets of
EUR496 billion and reported shareholders' equity (including minority interests)
of EUR18 billion as of 30 June 2009.
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's lowers most of hybrid securities' ratings on Fortis Bank and its subsidiaries and branches
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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