Hong Kong, June 14, 2016 -- Moody's Investors Service has placed on review for upgrade Suhyup
Bank's A2 long-term foreign currency deposit and senior unsecured
debt ratings.
The review is driven by the plan to spin off Suhyup Bank from the National
Federation of Fisheries Cooperatives (NFFC, unrated), scheduled
for 1 December 2016, and to inject KRW900 billion of capital into
the bank.
Moody's has also placed under review for upgrade Suhyup Bank's
baseline credit assessment (BCA) and adjusted BCA of ba3; foreign
currency senior unsecured MTN rating of (P)A2; long-term local
currency bank deposit rating of A2; and long-term Counterparty
Risk Assessment of A1(cr).
The full list of ratings is listed at the end of this press release.
RATINGS RATIONALE
On 19 May 2016, the National Federation of Fisheries Cooperatives
(NFFC) Act was revised, paving the way for the spin-off of
Suhyup Bank on 1 December 2016.
Moody's ratings review will focus on the execution of the spin-off
and capital injection as planned; the financial strength of NFFC
as the parent of Suhyup Bank; and the satisfactory resolution of
possible cross-guarantees for existing debt by all legal entities
after the reorganization, as required by the Commercial Act of Korea.
Under the approved plan, Suhyup Bank will be established as a wholly
owned subsidiary of NFFC, and will receive an additional capital
injection of KRW900 billion from NFFC and the government.
This exercise will improve the bank's capitalization, with
its Tier 1 ratio increasing about 400 basis points to 11.5%.
After the capital injection, its common equity Tier 1 ratio will
rise to about 10.5%.
Suhyup Bank is currently the credit business unit of NFFC, an umbrella
organization of 92 member cooperatives in the fisheries sector.
In 2001, the government bailed out the bank, with the bank
issuing preference shares to Korea Deposit Insurance Corporation.
The spin-off will enable the bank to become Basel 3 and IFRS compliant.
as NFFC will retain the preference shares issued to KDIC, and,
in turn, inject equity capital into Suhyup Bank.
Suhyup Bank had previously received a grace period for adopting Basel
3 and IFRS accounting standards since its preference shares under Basel
3 are accounted for as liabilities rather than equity.
Of the KRW900 billion in new capital that Suhyup Bank expects to receive
in the form of common equity, KRW550 billion will be funded from
the government, which will reimburse the interest expenses of the
debt issued by NFFC for five years.
An additional KRW350 billion will be funded from member coops, bank
management and employees, as well as debt issuance by NFFC.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
Suhyup Bank is headquartered in Seoul. It had total assets of KRW24.4
trillion or USD20.9 billion as of December 2015.
On Review for Possible Upgrade:
..Issuer: Suhyup Bank
....Baseline Credit Assessment and Adjusted
BCA, Placed on Review for Possible Upgrade, currently ba3
....Counterparty Risk Assessment, Placed
on Review for Possible Upgrade, currently A1(cr)/P-1(cr)
....Long term Foreign and Local Currency Deposit
Rating, Placed on Review for Possible Upgrade, currently A2,
outlook is changed to Rating Under Review From Stable
....Short term Foreign and Local Currency
Deposit Rating, Placed on Review for Possible Upgrade, currently
P-1
....Foriegn Currency Senior Unsecured MTN
Program Rating, Placed on Review for Possible Upgrade, currently
(P)A2
....Foreign Currency Senior Unsecured Debt
Rating, Placed on Review for Possible Upgrade, currently A2,
outlook is changed to Rating Under Review From Stable
....Foreign Currency Other Short Term Rating,
Placed on Review for Possible Upgrade, currently (P)P-1
Outlook Actions:
..Issuer: Suhyup Bank
....Outlook, Changed To Rating Under
Review From Stable
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Sophia Lee
VP - Senior Credit Officer
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
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 813-5408-4110
SUBSCRIBERS: 813-5408-4100
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 places Suhyup Bank's A2 long-term deposit and senior debt rating on review for upgrade