TEXT-S&P raise Ibercaja hybrids to 'CCC-'
-- On Nov. 21, 2012, Spain-based Ibercaja Banco S.A. (iberCaja) announced the completion of its offer to repurchase, among other securities, its outstanding preferred stock and nondeferrable subordinated debt securities. -- We are raising our issue ratings on the remaining preferred stock to 'CCC-' from 'C' and on the remaining nondeferrable subordinated debt to 'BB-' from 'D'. -- Today's action doesn't affect the counterparty credit ratings or any other issue ratings on iberCaja. Nov. 27 - Standard & Poor's Ratings Services said today that it has raised its issue ratings to 'CCC-' from 'C' on the remaining preferred stock issued by Spain-based Ibercaja Banco S.A. (iberCaja) and to 'BB-' from 'D' on its remaining nondeferrable subordinated debt. The rating action follows the bank's announcement on Nov. 21, 2012, that it had completed its Nov. 12, 2012, tender offer launched to repurchase, among other securities, its outstanding preferred stock and nondeferrable subordinated debt securities. This action doesn't affect the counterparty credit ratings on iberCaja or any other debt issue rating. In our media release on Nov. 15, 2012, we said that we considered iberCaja's tender offer be a "distressed exchange" under our criteria. According to our criteria, we lowered our issue ratings to 'C' on the preferred stock and to 'D' on the nondeferrable subordinated debt (see "Ibercaja's Hybrid And Subordinated Debt Downgraded To 'C' and 'D' On Distressed Exchange; No Other Ratings Affected"). We also stated that we would review our issue ratings on any securities subject to the offer that hadn't been purchased upon completion. As a result, we have decided to raise the ratings on the preferred stock to 'CCC-' from 'C' to reflect our view that, although the distressed exchange offer has been completed, there is a high probability of nonpayment of the preferred stock dividends in the fiscal year ending June 30, 2014. We think that iberCaja will report losses in 2012 once it recognizes the full impact of Spain's new provisioning regulation by the end of the year. This would trigger mandatory nonpayment because of the narrow earnings test typically included in the terms and conditions of the hybrid instruments for Spanish banks. In Spain, the payment of the preferred stock dividends for the current fiscal year is usually conditioned on the existence of distributable profits in the previous full year. Distributable profits are usually defined as the lower of net profits of either the bank or the consolidated group as reported to the Bank of Spain. We understand that the Bank of Spain could still allow the dividend payments to be made if iberCaja reported a loss, but we are unsure whether it would exercise this power, even though the dividend on the outstanding EUR8.6 million of preferred stock would be fairly small. We have also decided to raise the ratings on the nondeferrable subordinated debt to 'BB-'. In accordance with our criteria, our issue ratings on the nondeferrable subordinated debt are two notches below iberCaja's stand-alone credit profile, which we assess at 'bb+'. Following the settlement of the purchase, the remaining outstanding amount of nondeferrable subordinated debt is EUR298 milllion. RELATED CRITERIA AND RESEARCH -- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011 -- Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009 -- Timeliness of Payments: Grace Periods, Guarantees, And Use Of 'D' And 'SD' Ratings, Dec. 23, 2010 -- Credit FAQ: Applying The Bank Hybrid Capital Criteria To Specific Instruments, Dec. 20, 2011 -- Ibercaja's Hybrid And Subordinated Debt Downgraded To 'C' and 'D' On Distressed Exchange; No Other Ratings Affected, Nov. 15, 2012 -- S&P Says Lowering Of Some Spanish Banks' Preference Shares Were Due To Increased Vulnerability Of Nonpayment, May 28, 2012 RATINGS LIST Upgraded To From Ibercaja Banco S.A. Preferred Stock CCC- C Subordinated BB- D Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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