Fitch rates Banco Santander (Mexico) preferreds BBB-

Fitch Ratings said it assigned an expected long-term rating of BBB- to Banco Santander (Mexico), SA, Institucion de Banca Multiple, Grupo Financiero Santander Mexico's upcoming issue of up to $1.3 billion Reg S/144A subordinated preferred capital notes qualifying as Basel III compliant tier 2 capital.

The proposed notes will have a maturity of 10 years.

Banco Santander (Mexico) will use the proceeds of the offering to repurchase a portion or all of its outstanding 5.95% tier 2 subordinated preferred capital notes due 2024, under the concurrent tender offer for the notes, and for general corporate purposes.

The tier 2 subordinated preferred capital notes are rated two notches below the viability rating.

Tier 2 notes in Mexico are typically rated three notches below the anchor rating. However, in this case Fitch said it considers that parental support neutralizes non-performance risk and therefore Banco Santander (Mexico)’s tier 2 securities are rated at the level that would be assigned to equivalent securities issued by its ultimate parent, Banco Santander, SA (A-/stable).

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