RPT-Fitch Rates OCBC's Basel III Tier 2 Notes Final 'A+'/RWN

Fri Jun 20, 2014 3:04am EDT

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June 20 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Oversea-Chinese Banking Corp's (OCBC) USD1bn 4.25% Basel III-compliant Tier 2 capital securities due 2024 a final rating of A+', on Rating Watch Negative (RWN).

This follows the completion of the securities' issue and receipt of final documentation conforming to information already received. The final rating is the same as the expected rating assigned on 11 June 2014.

KEY RATING DRIVERS

The Basel III-compliant Tier 2 securities are rated one notch below OCBC's Viability Rating (VR) of 'aa-'/RWN to reflect their below-average loss-severity risk due to their partial rather than mandatory full write-off feature. The notes contain a non-viability clause and rank subordinated to senior unsecured instruments.

The Monetary Authority of Singapore (MAS) has sole discretion in determining if OCBC is non-viable, and if it does so, the securities may be written down in full or in part to the extent determined by OCBC, which Fitch expects to be in conjunction with what MAS considers necessary to restore the viability of the bank. The write-off can be effected in full even if it is not sufficient for the trigger event to cease to continue. There are no write-back features on the securities.

No additional notching has been ascribed to non-performance risk as Fitch regards it minimal relative to the VR assigned. The instruments will not qualify for equity credit under Fitch's criteria.

Upon the occurrence of any winding-up proceedings, holders of these securities - and all Tier 2 securities of OCBC - will rank pari-passu, i.e. below the bank's senior creditors, including depositors, but above the bank's ordinary shareholders and additional Tier 1 capital securities in priority of claims.

RATING SENSITIVITIES

A change in OCBC's VR, presently on RWN, will have an impact on the securities rating. The RWN reflects OCBC's planned acquisition of Hong Kong's Wing Hang Bank Limited (A-/Rating Watch Positive) and also applies to OCBC's Long-Term and Short-Term Issuer Default Ratings (see "Fitch Places OCBC on Watch Negative on Wing Hang Bank Takeover Plan", dated 2 April 2014).

Established in 1932, OCBC is a Singapore-based listed bank with reported total assets of SGD344bn at end-March 2014.

OCBC's other ratings are as follows:

Long-Term IDR 'AA-'; on RWN

Short-Term IDR 'F1+'; on RWN

Viability Rating 'aa-'; on RWN

Support Rating '1'

Support Rating Floor 'A-'

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