January 29, 2007 | Cbonds
|Fitch Ratings-London/Moscow-26 January 2007: Fitch Ratings has today assigned Standard Bank Plc’s upcoming loan participation notes (“LPN”) issue an expected Long-term 'B-' (B minus) rating and an expected Recovery Rating 'RR4'. The notes are to be issued for the sole purpose of financing a loan to First Ukrainian International Bank (“FUIB”), rated Issuer Default 'B-' (B minus), Short-term 'B', Individual 'D', Support '5' and National Long-term 'BBB(ukr)'. The Outlooks on both the Issuer Default and the National Long-term ratings are Stable. The issue’s final ratings are contingent upon receipt of final documentation conforming materially to information already received.|
The terms and conditions of the notes specify that they will rank at least equally with the claims of other senior unsecured creditors of FUIB, save those preferred by relevant (bankruptcy, insolvency, liquidation) laws. Under Ukrainian bankruptcy law, obligations to individual depositors and account holders rank above those of other senior unsecured creditors. At end-Q306, retail deposits and accounts comprised 22.8% of FUIB's total liabilities, according to the bank's unaudited IFRS interim financial statements. Furthermore, related-party liabilities constitute a significant part of FUIB's total liabilities (18.5% at end-Q306). In Fitch's opinion, this could give rise to additional risks to noteholders in a default scenario, albeit not to the extent that these would justify a lower Recovery Rating than 'RR4' for the current transaction.
Covenants oblige FUIB to maintain a Basel I total capital ratio of at least 10%, specify that the bank’s transactions with affiliates must be on market terms, limit dividend payments and stock redemptions to 50% of consolidated annual net profit under IFRS, and restrict reorganisations including mergers, divisions and disposals of assets. The terms and conditions of the notes also contain a cross default clause, triggered by overdue indebtedness of USD10m, and a negative pledge clause, which allows for securitisation up to a limit of 15% of gross loans under IFRS Should any securitisation be undertaken, Fitch comments that the nature and extent of any overcollateralisation would be assessed by the agency for any potential impact on unsecured creditors.
Noteholders will also enjoy a put option should any change in control of the bank result in a rating downgrade.
|Full company name||Public joint-stock company "First Ukrainian International Bank"|
|Country of risk||Ukraine|