February 01, 2007 | Cbonds
|Fitch Ratings-London/Moscow-1 February 2007: Fitch Ratings has today assigned Ukraine-based JSC Bank for Social Development Ukrsotsbank’s (“Ukrsots”) upcoming issue of limited recourse loan participation notes an expected Long-term ‘B-‘ (B minus) rating and an expected Recovery Rating ‘RR4’. The Long-term rating of the notes is also placed on Rating Watch Positive ("RWP"). The limited recourse notes are to be issued by Credit Suisse International for the sole purpose of financing a loan to Ukrsots, which is rated Issuer Default 'B-' (B minus), Short-term 'B', Individual 'D' and Support '5'. Ukrsots's Issuer Default and Support ratings are on RWP. The final ratings on the bond are contingent upon receipt of final documentation conforming materially to information already received. |
Credit Suisse International’s obligation is to solely account to noteholders for amounts of principal and interest received from Ukrsots. Credit Suisse International will charge certain rights and interests under the loan agreement to the trustee, The Bank of New York, for the benefit of noteholders under a trust deed.
The claims under the loan agreement will rank at least equally with the claims of other senior unsecured creditors of Ukrsots, save those whose claims are preferred by any bankruptcy, insolvency, liquidation or similar laws of general application. Under Ukrainian law, the claims of retail depositors and account holders rank above those of other senior unsecured creditors. At end-9M06, retail deposits and accounts represented a high 34% of total liabilities, according to the bank's reviewed IFRS accounts.
The loan agreement contains covenants restricting mergers and disposals by Ukrsots and its material subsidiaries, transactions between the bank and its affiliates, and certain payments and distributions by the bank and its subsidiaries. It also contains a cross default clause and a 'negative pledge' clause, the latter of which allows for a degree of securitisation by Ukrsots. In the event of any securitisation, Fitch comments that the nature and extent of any over-collateralisation would be assessed by the agency for any potential impact on unsecured creditors. Ukrsots must ensure full compliance with the National Bank of Ukraine’s (“NBU”) minimum mandatory capital adequacy requirement of 10%.
Fitch also notes that the draft prospectus contains an additional clause specifying that the notes may be redeemed at the option of the noteholders at their principal amount, together with accrued interest to the date of redemption, following the occurrence of a put event. The latter is deemed to have occurred if Viktor Pinchuk or, if and when the proposed sale of his controlling stake to Intesa Sanpaolo S.p.A. (“Intesa”) is completed, Intesa or any of its affiliates ceases to control (directly or indirectly) 50% plus one share of the voting stock of Ukrsots, and such an event results in a rating downgrade.
At end-2006, Ukrsots was the sixth-largest bank in Ukraine, holding around 5.1% of system assets, and top five positions in terms of market share in all major segments according to the NBU. Retail business has been the largest growth driver between 2004 and 2006, and at end-9M06 retail loans and deposits accounted for 52% and 34% of the loan book and funding base, respectively. The retail customer base comprises over a million individual clients acquired through one of the largest nationwide networks, comprising over 500 branches. Ukrsots is currently indirectly (88.55%) owned by Viktor Pinchuk, who also owns Interpipe Corporation, one of the largest private companies in Ukraine.
|Full company name||Ukrsotsbank PJSC|
|Country of risk||Ukraine|
|Country of registration||Ukraine|