TEXT-Fitch keeps NCG Banco on watch negative
Dec 4 - Fitch Ratings has maintained NCG Banco, S.A.'s (NCG) Long-term Issuer Default Rating (IDR) of 'BB+', Support Rating of '3' and Support Rating Floor (SRF) of 'BB+' on Rating Watch Negative (RWN) and downgraded its Viability Rating (VR) to 'f' from 'c'. A full list of rating actions is at the end of this rating action commentary. RATING ACTION RATIONALE The downgrade of the VR reflects the recent European Commission approval of the restructuring plan for NCG which calls for the injection of EUR5.4bn in capital by Spain's Fund for Orderly Bank Restructuring (FROB) previous to burden sharing by subordinated debt and preference shareholders is undertaken and real estate assets are transferred to an asset management company (Sareb). In Fitch's opinion, NCG has failed, and would have defaulted had it not received extraordinary support. NCG's IDRs and Support Ratings were placed on RWN on 10 October 2012, to reflect the fact that there was a risk that alternative scenarios under orderly resolution by which some form of default, or 'restricted default', under Fitch's definition and criteria, could be undertaken. As the bank is undergoing restructuring, this is no longer the case. However, the RWN has been maintained on the Long-term IDR, the Support Rating and the SRF to reflect the fact that NCG is being forced to reduce its size significantly as a condition to receiving capital assistance and will become less systemically important. Also, Fitch expects the propensity of the state to support an entity that has already received substantial state assistance to diminish in the future. In addition to the EUR5.4bn expected capital injection, NCG has already received EUR3.6bn in funds from the FROB. RATING DRIVERS AND SENSITIVITIES - IDRS, SUPPORT RATING, SRF NCG's Long-term IDR is at the SRF. On the downside, NCG's IDRs, Support Rating and SRF are sensitive to a downgrade of the Spanish sovereign rating or to any change in Fitch's assumptions around the strategic importance of this institution as well as the propensity of the state to support the bank in the future. Fitch expects to resolve the RWNs once it has been able to meet with the bank's management and reassess the bank's credit profile and its systemic importance following restructuring and recapitalisation. RATING DRIVERS AND SENSITIVITIES - VR Once capital is injected into NCG, the agency will reassess the banks VR and upgrade it to a level commensurate with its post-support credit and financial profile. The initial scope for this upgrade is likely to be constrained by weak economic conditions and still close relationship between sovereign and bank ratings. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES NCG's subordinated debt and preference shares have been affirmed at 'C' as these form part of the burden sharing of losses after capital injection as per the Memorandum of Understanding signed between the Spain and the Eurogroup on July 2012. The rating actions are as follows: NCG: Long-term IDR: 'BB+', maintained on RWN Short-term IDR: affirmed at 'B', removed from RWN Viability Rating: downgraded to 'f' from 'c' Support Rating: '3' maintained on RWN Support Rating Floor: 'BB+', maintained on RWN Senior unsecured debt long-term rating: 'BB+', maintained on RWN Senior unsecured debt short-term rating and commercial paper: affirmed at 'B' removed from RWN Subordinated lower tier 2 debt: affirmed at 'C'' Subordinated upper tier 2 debt (ISIN: ES0214958045): affirmed at 'C' Preferred stock: affirmed at 'C' State-guaranteed debt: affirmed at 'BBB' Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria 'Global Financial Institutions Rating Criteria' dated 15 August 2012, is available on www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria
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