RPT-Fitch Rates Bendigo and Adelaide Bank's Basel III Sub-Debt 'BBB+'

Thu Jan 23, 2014 1:41am EST

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Jan 23 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned a rating of a€˜BBB+a€™ on Bendigo and Adelaide Bank Limited a€™s (BEN) Basel-III compliant Tier 2 instrument, which will be issued on 29 January 2014.

The direct, unsecured and subordinated obligations will be denominated in Australian dollars and will be issued under BEN's AUD5bn Debt Instrument Programme. BENa€™s issue will be AUD300m in size, replacing a small amount of legacy Lower Tier 2 subordinated debt, which matured in 2013. The notes can be called after five years subject to regulatory approval by the Australian Prudential Regulatory Authority (APRA). Final maturity is 29 January 2024. The notes include a non-viability clause and will qualify as Tier 2 capital for the bank in accordance with APRAa€™s written requirement.

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BENa€™s Tier 2 instrument is classified as subordinated debt and is rated one notch below its Viability Rating (VR) of a€˜a-a€™ to reflect its below-average recovery prospects relative to senior unsecured instruments. The notes will convert to equity in part or full should APRA consider this step necessary to maintain the bank's viability (that is, at the point of non-viability). If this is not possible, the notes would be written down in full or in part.

The notes have been notched from the bank's VR. The agency believes no additional notching from the VR for non-performance is required to capture the point of non-viability as it is broadly the same as that expressed in the VR. BEN's total regulatory capital ratio was 10.71% at end-June 2013. The new issue is likely to increase the capital ratio by 98 basis points based on its June 2013 capital position.

Under Fitch's methodology, the instrument does not qualify for any equity credit.

BENa€™s subordinated debt ratings are broadly sensitive to the same considerations that might affect BENa€™s VR (see Rating Action Commentary dated 28 November 2013).

Bendigo and Adelaide Banka€™s ratings are as follows:

Long-Term Issuer Default Rating (IDR): 'A-'; Outlook Stable;

Short-Term IDR: 'F2';

Viability Rating: 'a-';

Support Rating: '3';

Support Rating Floor: 'BB';

Commercial Paper: a€˜F2a€™;

Long-Term senior unsecured debt: a€˜A-a€™;

Short-Term senior unsecured debt: a€˜F2a€™; and

Lower Tier 2 debt assigned: a€˜BBB+a€™.

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