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Danske Bank A/S Announces Revised S&P Bank Hybrid Methodology Impact on Danske Bank’s Issue of Tier 2 Subordinated Debt


Wednesday, 17 Jul 2013 06:23am EDT 

Danske Bank A/S announced that on July 16, 2013, Standard & Poor’s (S&P) published its revised methodology, which concluded that the equity content assigned to the Bank's USD 1 billion Tier 2 subordinated debt issue - Subordinated Fixed Rate Resettable Notes due 2037, ISIN XS0831342679 (the securities) will be changed to minimal from intermediate, implying that the securities will no longer be included in the Risk Adjusted Capital (RAC) ratio. In September 2012, Danske Bank brought the USD 1 billion Tier 2 subordinated debt issue to the market for the specific purpose of improving Danske Bank’s RAC ratio in accordance with S&P's rating methodology criteria of November 2011. The securities were assigned intermediate equity content by S&P, essential for the RAC eligibility of the issuance. The Securities’ eligibility to S&P’s RAC was publicly confirmed by S&P in its press release of November 28, 2012. At the time of issuance, the Securities had been designed according to S&P’s methodology, and certain features were incorporated beyond regulatory requirements specifically to address S&P’s requirements. The inclusion of such features impacted the pricing of the securities, resulting in a higher cost compared with a conventional Tier 2 issue. Danske Bank is considering potential options following S&P’s methodology change, however no final decision has been made yet. 

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