TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Fitch rates RI's first Basel III Tier 2 bonds from UOBI
Fitch Ratings has assigned PT Bank UOB Indonesiaâs (UOBI; AAA (idn)/Stable) Basel III-compliant Tier 2 subordinated debt issue â the first such issue in Indonesia â a National Long-Term rating of "AA (idn)"
Change Size
F
itch Ratings has assigned PT Bank UOB Indonesia's (UOBI; AAA (idn)/Stable) Basel III-compliant Tier 2 subordinated debt issue ' the first such issue in Indonesia ' a National Long-Term rating of "AA (idn)".
'Proceeds from the issue, which will be up to Rp 1 trillion [US$ 88 million] and have a maturity of up to 7 years, will be used to support the company's business growth,' Fitch said in a release made available to The Jakarta Post on Monday.
"AA" National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.
In Fitch's view, new Basel III Tier 2 debt capital instruments do not have material incremental risk, particularly in terms of loss severity, compared with legacy Tier 2 securities. This is because the equity conversion and write-down features will not be easily triggered and Tier 1 instruments are expected to absorb losses before Tier 2 ones.
Fitch rated legacy Tier 2 debt one notch down from the issuer's anchor rating for loss severity, and the agency will do the same for the new Basel III Tier 2 instruments. Legacy Tier 2 debt capital instruments were rated two notches down from the issuer's anchor rating for non-performance risk, mainly to account for the deferral features.
With deferral of payments likely to be triggered before the equity conversion and write-down features, Fitch will continue the same notching for Basel III Tier 2 instruments.
For foreign-owned banks with institutional support from their parents, the rating on their Basel III Tier 2 instruments will be notched twice from the subsidiary's anchor ratings - once for loss severity and once for non-performance risk as the non-performance risk is partly neutralized by potential parental support, according to Fitch criteria.
'Therefore, UOBI's proposed Basel III Tier 2 debt is rated two notches down from its National Long-Term Rating, one notch for loss severity [reflecting the equity conversion and write-down features] and one for non-performance risk [reflecting their subordinated status and coupon and/or principal deferral risk]' it said. (ebf)
