Fitch Rates Oschadbank's Upcoming Eurobond 'B(EXP)'/'RR4'

Thu Mar 7, 2013 10:59am EST

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(The following statement was released by the rating agency) LONDON/MOSCOW, March 07 (Fitch) Fitch Ratings has assigned SSB No.1 PLC's upcoming issue of fixed-rate limited recourse notes an expected Long-term rating of 'B(EXP)' and a Recovery Rating of 'RR4'. The issue's total amount and final maturity are yet to be determined. The notes are to be used solely for a US dollar-denominated loan to Ukraine-based JSC State Savings Bank of Ukraine (Oschadbank, 'B'/Stable/'b-'). SSB No.1 PLC, a UK-based company, will only pay noteholders amounts (principal and interest) received from Oschadbank under the loan agreement. The claims under the loan agreement will rank at least equally with the claims of other senior unsecured and unsubordinated creditors of Oschadbank, save those preferred by relevant Ukrainian legislation. Under Ukrainian law, the claims of retail depositors rank above those of other senior unsecured creditors. Oschadbank is the only bank in Ukraine where retail deposits are fully covered by state guarantee regardless of the amount. At end-2012, retail depositors accounted for around 44% of Oschadbank's non-equity funding, according to the bank's local GAAP reporting. At end-2012, Oschadbank was the second-largest bank in Ukraine by total assets and had the largest branch network in the country with around 6,000 branches and outlets. The Cabinet of Ministers of Ukraine holds 100% of the bank's shares. KEY RATING DRIVERS The issue's Long-term rating corresponds to Oschadbank's Long-term foreign currency Issuer Default Rating (IDR; 'B'/Stable). The issue's Recovery Rating of 'RR4' reflects average recovery prospects for bondholders in case of default. Oschadbank's IDRs, National Long-term rating and Support Rating are driven by potential support from the Ukrainian authorities, in case of need, based on the bank's 100% state ownership, its policy role, high systemic importance, and the track record of capital support for the bank under different governments. The ratings also take into consideration the ability of the Ukrainian authorities to provide such support, which remains limited, as indicated by the sovereign's 'B' Long-term IDR. Oschadbank's VR reflects its large deposit-taking franchise, comfortable liquidity position and a sizeable capital buffer. It also considers significant concentration risk in Oschadbank's loan book, notably its exposure to NJSC Naftogaz of Ukraine ('CCC'), and dependence on financial support from the National Bank of Ukraine associated with this exposure. RATING SENSITIVITIES Any changes to Oschadbank's Long-term foreign currency IDR would also impact the issue's Long-term rating. The Stable Outlook on the bank's Long-term IDR reflects that on the sovereign's Long-term IDR. Improvement or deterioration in Ukraine's sovereign risk profile would generate upward or downward pressure, respectively, on Oschadbank's ratings. Oschadbank's ratings are as follows: Long-term foreign and local currency IDRs: 'B'; Outlook Stable Senior unsecured debt: 'B'; Recovery Rating 'RR4' Senior unsecured debt in local currency: 'AA-(ukr) Short-term foreign currency IDR: 'B' Support Rating: '4' Support Rating Floor: 'B' VR: 'b-' National Long-term rating: 'AA-(ukr)'; Outlook Stable Contact: Primary Analyst Natalia Shakhina Analyst +44 20 3530 1577 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Olga Ignatieva Director +7 495 956 6906 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. 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' and 'Recovery Ratings for Financial Institutions', both dated 15 August 2012, available at www.fitchratings.com. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria here Recovery Ratings for Financial Institutions here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

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