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  1. Moody’s assigns B1 (hyb) to SBI’s Additional Tier 1 bonds

Moody’s assigns B1 (hyb) to SBI’s Additional Tier 1 bonds

Moody's on Wednesday assigned a B1 (hyb) rating to State Bank of India's (SBI) dollar-denominated non-cumulative, non-convertible perpetual capital securities.

By: | Mumbai | Published: September 14, 2016 1:08 PM
The securities are issued under SBI's  billion Medium Term Note (MTN) program, via the bank's Dubai International Financial Centre Branch. (Reuters) The securities are issued under SBI’s billion Medium Term Note (MTN) program, via the bank’s Dubai International Financial Centre Branch. (Reuters)
Moody’s on Wednesday assigned a B1 (hyb) rating to State Bank of India’s (SBI) dollar-denominated non-cumulative, non-convertible perpetual capital securities.
The securities are issued under SBI’s $10 billion Medium Term Note (MTN) program, via the bank’s Dubai International Financial Centre Branch. The terms and conditions of the capital securities incorporate Basel III-compliant non-viability language in accordance with Reserve Bank of India (RBI) guidelines, and will qualify as regulatory Additional Tier 1 (AT1) capital securities.
Last week Bloomberg had reported that SBI has picked banks to work on a bond offering that could raise about $1 billion, in India’s first sale of US dollar additional Tier 1 bonds since the country implemented Basel III rules, citing people with knowledge of the matter. India’s largest lender has chosen chosen firms including Bank of America, Citigroup and JPMorgan Chase & Co for the offering of loss-absorbing capital instruments. HSBC Holdings, National Bank of Abu Dhabi PJSC, SBI Capital Markets and Standard Chartered were also working on the sale, it said.
“The rating is positioned three notches below the bank’s adjusted baseline credit assessment (BCA) of ba1, in accordance with Moody’s standard notching guidance for contractual non-viability preferred securities with an optional, non-cumulative distribution-skip mechanism,” it said in a statement.
Under the terms and conditions, the principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, when SBI’s group or solo common equity tier 1 (CET1) ratio is at or below the 5.5% prior toMarch 31, 2019, and 6.125% from and including March 31, 2019. “In such a scenario, the write-off may be temporary and the amount written-off could be reinstated subject to RBI’s conditions,” Moody’s said.
Loss absorption, it said, will also be triggered in the event that the RBI notifies the bank that without such write-off, the bank would become non-viable, or if the RBI decides to make a public sector capital injection without which the bank would become nonviable. “Additionally, such loss absorption will be triggered if RBI or any other relevant authority decides to reconstitute or amalgamate the bank with another bank. In such scenarios, the write-down will be permanent,” Moody’s added.

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