(Repeat for additional subscribers)
March 24 (The following statement was released by the rating agency)
Fitch Ratings has assigned a final rating of 'BBB' to the USD1.5bn Basel III-compliant Tier
2 ten-year subordinated notes issued by Mizuho Financial Group (Cayman) 3 Limited, a
wholly-owned subsidiary of Mizuho Financial Group, Inc. (Mizuho; A-/Stable). The notes
are fully and unconditionally guaranteed by Mizuho on a subordinated basis. This is the first
cross-border Basel III-compliant instrument issued by a Japanese banking group.
The notes will constitute unsecured and subordinated obligations of Mizuho
Financial Group (Cayman) 3 Limited and rank pari passu among themselves equally
with all other present and future unsecured, unconditional and dated
subordinated obligations. The notes are scheduled to be issued on 27 March 2014
and due on 27 March 2024. They carry a fixed coupon of 4.6% annually. The notes
include a non-viability clause and will qualify as Tier 2 capital for Mizuho.
Mizuho Financial Group (Cayman) 3 Limited will use the proceeds of the notes to
extend a subordinated loan to Mizuho's banking subsidiary, Mizuho Bank, Ltd.
(MHBK; A-/Stable), for which the loan will qualify as Tier 2 capital.
KEY RATING DRIVERS
Fitch rates the notes two notch below Mizuho's Long-Term Issuer Default Rating
(IDR). This is to reflect their poor recovery prospects relative to senior
unsecured instruments given their subordination and the prospect of full and
permanent write-down of the securities upon Mizuho reaching the point of
non-viability (PONV). The PONV trigger is fully contractual and explicitly
refers to a particular event: when the Japanese Prime Minister confirms that the
Specified Item 2 Measures set forth in Article 126-2, Paragraph 1, Item 2 of the
Deposit Insurance Law needs to be applied to Mizuho.
The notes have been notched from the bank's IDR (the anchor rating) based on the
agency's view that Mizuho is a systemically important financial institution (FI)
in Japan. Fitch believes that support can be factored into such instrument
ratings issued by systemically important and complex FIs because Japan's Deposit
Insurance Law enables the government to pre-emptively provide financial
assistance to such FIs when necessary under Specified Item 1 Measures of Article
126-2, Paragraph 1, Item 1 or Item 1 Measures of Article 102, Paragraph 1, Item
1. No further notching for non-performance risk applies for the Tier 2 notes in
the absence of any more easily hit triggers that would result in coupon
Under Fitch's methodology the instrument would not qualify for any equity
Any changes to Mizuho's IDR would impact the issue's rating. The IDR is
sensitive to any change in assumptions around the probability of the Japanese
government providing timely support to Mizuho as the rating is at the Support
Rating Floor (SRF) of 'A-'.
Changes in the resolution framework that increases the risk of the PONV being
triggered or changes in assessment of Mizuho's systemic importance that reduce
the likelihood of pre-emptive support would lead to a downgrade of Mizuho's SRF
- and potentially the rating on the Tier 2 bonds. Japan's sovereign rating
(A+/Negative) being downgraded to below 'A' would also result in a lower SRF.
The prospect for an upgrade of the IDR is limited as it requires an unlikely
upgrade of the Viability Rating (VR) by more than two notches. Currently,
Mizuho's VR is at 'bbb+', one notch below its 'A-' IDRs.