Moody’s rates Alfa-Bank LPNs B2 (hyb)

Moody's Investors Service said it assigned a B2 (hyb) rating to Alfa-Bank's $700 million 8% perpetual loan participation notes.

The notes were issued by a special purpose vehicle, Alfa Bond Issuance plc, for the sole purpose of financing subordinated loan to Alfa-Bank. The notes are classified as additional Tier 1 capital under Russian regulations.

“According to Moody's framework for rating non-viability securities under its bank rating methodology, the agency typically positions the rating of additional Tier 1 securities three notches below the bank's adjusted baseline credit assessment (BCA). One notch reflects the high loss-given-failure that these securities are likely to face in a resolution scenario, due to their subordination and limited protection from residual equity,” the agency said in a news release.

“Moody's also incorporates two additional notches to reflect the higher risk associated with the non-cumulative coupon skip mechanism, which could precede the bank reaching the point of non-viability.”

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