RPT-Fitch Rates DBS Group Holdings' US Dollar Notes Final 'AA-'

Fri Jul 11, 2014 5:42am EDT

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July 11 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Singapore-based DBS Group Holdings' (DBSH) USD750m 2.246% notes due 2019 and USD500m floating rate notes due 2019 each a final rating of 'AA-'. Both tranches of senior unsecured notes were issued under the joint USD15bn global medium term note (GMTN) programme that the entity shares with its fully-owned subsidiary, DBS Bank Ltd. (DBS Bank; AA-/Stable/F1+).

This follows the completion of the issuance of the notes, as well as the receipt of final documents conforming to information previously received. The final rating is the same as the expected rating assigned on 7 July 2014.

This is DBSH's first senior unsecured debt issuance. The company intends to use the net proceeds from the issuance for its finance and treasury activities, including the provision of intercompany loans, or other forms of financing, to DBS Bank and its subsidiaries.

DBSH is a bank holding company, and fully owns DBS Bank, which is currently its only direct operating subsidiary and its main source of recurring cashflows in the form of dividends. Both entities are assessed to be highly integrated, operate in the same jurisdiction and are supervised by the Monetary Authority of Singapore (MAS) on a group-wide basis.

KEY RATING DRIVERS

The notes are rated at the same level as DBSH's 'AA-' Long-Term Issuer Default Rating (IDR). This is because the notes constitute direct, unsubordinated and unsecured obligations of DBSH.

The notes are structurally subordinated to the liabilities and obligations of DBSH's subsidiaries, including DBS Bank. Nonetheless, the Viability Rating (VR) and IDR of DBSH, which reflect the credit profile of its senior unsecured obligations, are equalised with that of DBS Bank, due to the seamless integration between the two entities, as well as DBSH's straightforward balance sheet and low double leverage ratio of 88% at end-2013. DBSH's leverage may increase with the issuance of senior unsecured debt, but is expected to remain low overall.

RATING SENSITIVITIES

A change in DBSH's IDR, presently on Stable Outlook, will have an impact on the issue rating. Further, a change in DBS Bank's IDR, presently on Stable Outlook, is likely to have a similar rating impact on DBSH.

DBSH's ratings may be notched down from those of DBS Bank if their risk profiles were to diverge, for instance due to a combination or one of the following factors: significant leverage and/or other equity investments at DBSH's standalone balance sheet, onerous banking regulations surrounding capital and/or liquidity flows from DBS Bank to DBSH, or negative developments in the philosophy on banking group resolution.

For more details on DBS Bank's rating and credit profile, see "Fitch Affirms DBS, OCBC & UOB at 'AA-' ; Outlook Stable", dated 23 October 2013 and Fitch's "Financial Institutions 2014 Outlook Compendium", dated 19 February 2014.

For more details on DBSH's rating and credit profile, see "Fitch Rates DBS Group Holdings 'AA-' /Stable", dated 1 November 2013.

DBSH's other ratings are as follows:

Long-Term IDR 'AA-', Outlook Stable

Short-Term IDR 'F1+'

Viability Rating 'aa-'

Support Rating '5'

Support Rating Floor 'No Floor'

DBS Bank's other ratings are as follows:

Long-Term IDR 'AA-', Outlook Stable

Short-Term IDR 'F1+'

Viability Rating 'aa-'

Support Rating '1'

Support Rating Floor 'A-'

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