Dec 18 - Fitch Ratings has downgraded EUR67.6m Basel III-compliant
subordinated Tier 2 notes (XS0732522023) issued by EFG International (Guernsey)
Limited and guaranteed by EFG International AG (EFGInt) to 'BBB+' from
'A-'. At the same time, the agency has assigned an expected rating of
'BBB+(EXP)' to Tier 2 Resettable Guaranteed Subordinated Notes to be issued in
January 2013 by EFG Funding (Guernsey) Limited and guaranteed by EFGInt.
The downgrade of the outstanding notes reflects a revision of Fitch's
subordinated and hybrid securities rating criteria (see 'Assessing and Rating
Bank Subordinated and Hybrid Securities', dated 5 December 2012) and is not
linked to EFGInt's standalone credit profile. EFGInt is rated Long-term Issuer
Default Rating (IDR) 'A' with a Negative Outlook, Short-term IDR 'F1', Viability
Rating (VR) 'a', Support Rating '5' and Support Rating Floor 'No Floor'.
The rating of the outstanding issue and the expected rating of the upcoming
issue are notched down twice from EFGInt's VR to reflect Fitch's view of the
high loss severity of the notes due to their contractual write-down language.
Both notes will be written-down to zero and cancelled upon occurrence of a
non-viability event, defined as either regulatory intervention or the receipt of
extraordinary support from the public sector.
According to Fitch's subordinated and hybrid securities rating criteria, Tier 2
instruments with contractual write-off language are likely to be notched twice
from the VR instead of once as is the case for legacy lower Tier 2 instruments.
Given the automatic, complete and permanent write-down feature in EFGInt's Basel
III-compliant Tier 2 instruments as well as the clearly-defined role of these
instruments in the context of Switzerland's bank resolution and insolvency
regime, Fitch has therefore decided to widen the notching from one to two
Given that coupon deferral in a going-concern scenario is not possible, Fitch
has not added any additional notches for incremental non-performance risk
relative to EFGInt's VR.
The rating and expected rating are linked to EFGInt's VR and are primarily
sensitive to a change in the bank's VR. A rating action on EFGInt's VR would be
directly mirrored by a corresponding rating action on the rating and expected
The issue of EFGInt's Tier 2 Resettable Guaranteed Subordinated Notes in early
January 2013 is contingent on the successful execution of a cash tender offer of
EFGInt's outstanding fiduciary certificates backed by preferred shares