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Fitch Assigns Privatbank’s Upcoming Debut Eurobond Expected 'B' Rating

January 18, 2007 | Cbonds

Fitch Ratings-London/Moscow-18 January 2007: Fitch Ratings has today assigned UK SPV Credit Finance PLC's (“the SPV”) upcoming issue of fixed-rate USD notes expected ratings of Recovery 'RR4' and Long-term 'B'.

The notes are to be used for the sole purpose of financing a loan from the SPV to Ukraine-based CJSC Privatbank ("Privat"), rated Issuer Default 'B' with a Positive Outlook, Short-term 'B', Individual 'D' and Support '4'. Privat will unconditionally and irrevocably guarantee the payment of principal and interest under the notes. The SPV will grant security over the loan to a trustee, the Bank of New York, for the benefit of noteholders. The final ratings of the issue are contingent upon receipt of final documentation conforming materially to information already received.
The SPV’s claims under the loan agreement will rank at least equally with the claims of other senior unsecured creditors of Privat, save those claims, including those of retail depositors, which are preferred under Ukrainian law. At end-9M06, retail deposits accounted for a high 50% of Privat's total liabilities, according to the bank's reviewed IFRS accounts, which could significantly limit recoveries for Privat’s other senior creditors in a default scenario. While, in Fitch’s view, this risk is not at present sufficient to warrant a Recovery Rating of below ‘RR4’ for the notes, any significant further increase in the proportion of retail funding in Privat’s liabilities could lead to a downgrade of the Recovery and Long-term ratings of the notes. That said, Fitch notes that the successful completion of the current transaction would result, at least temporarily, in a reduction in the proportion of retail funding.
The loan agreement contains covenants that restrict mergers and disposals by Privat and oblige it to enter into any transactions with affiliates on market terms. It also contains a cross default clause, which is triggered by overdue indebtedness of USD20 million or more, and a negative pledge clause, which allows for securitisations in an amount up to 35% of Privat’s assets. Fitch comments that the nature and extent of any over-collateralisation under such transactions would be assessed by the agency for any potential impact on unsecured creditors.
Privat is the largest bank in Ukraine by total assets, equity, retail deposits and number of branches. Three individuals with extensive industrial assets ultimately own around 94% of the bank. The remaining 6% is held by its senior management.

Company: PrivatBank

Full company namePrivatBank PJSC
Country of riskUkraine
Country of registrationUkraine


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