MOODY'S ASSIGNS B1 LONG-TERM DEBT RATING TO THE UPCOMING ISSUE OF ALB FINANCE B.V. PERPETUAL CAPITAL SECURITIES; POSITIVE OUTLOOK
31.03.06 11:16
/REUTERS, March 31, 06/ - Moody's Investors Service has assigned a long-
term rating of B1 to Perpetual Capital Securities ("the Securities") to be
issued by ALB Finance B.V. ("the Issuer"), a special purpose vehicle wholly-
owned by Alliance Bank, Kazakhstan ("the Bank") and consolidated within its
group structure. Alliance Bank has a long-term deposit and senior debt rating
of Ba2, Financial Strength Rating of E+ and "Not Prime" short-term rating; the
outlook is positive. The Securities have the benefit of a subordinated support
agreement from the bank, which allows them to qualify as a junior
subordinated debt as per Moody's classification. The amount of the issue has
yet to be determined, but is likely to be US$150 million, of which about US$30
million is expected to immediately qualify as Tier 1 capital, with the remainder
boosting the bank's Tier 2 capital (with the prospect of a future re-
classification alongside the growth in shareholders' equity). The rating is
subject to Moody's review of the final documentation on the issue. The
outlook for the rating is positive.
The Securities will have no fixed final redemption date, but will be callable by
the Issuer commencing from the tenth anniversary of the closing date of the
issue (subject to regulatory approval); they will also become redeemable at
the Issuer's option in the period from the fifth to the tenth anniversary of the
closing date in case of changes in taxation or disqualification by Kazakhstan's
regulator as a part of the Bank's Tier 1 capital.
Moody's notes that the rating is based on (i) Alliance Bank's fundamental
credit quality as reflected in its deposit and financial strength ratings, (ii)
the extent of the instrument's subordination against various classes of debt and
equity, as well as (iii) the predictability of ongoing payments. The level of the
rating reflects Alliance Bank's rapidly growing domestic franchise and
increasing importance to the national banking system.
The rating also takes into account the relative ranking of the Securities, which
will stand senior to common equity and preferred stock holders, on a par with
unsecured, perpetual, subordinated obligations, but behind most of the senior
unsecured and non-perpetual subordinated obligations, in case of liquidation.
Moody's also notes that the rating factors in Alliance Bank's mandatory
obligation to suspend non-cumulative interest payments on the Securities, if it
were in breach of Kazakhstan's prudential capital adequacy requirements, or
if the payment results in such a breach. However, in all other cases (unless
legally prohibited by the Kazakh laws and regulations) Alliance Bank must
make distributions on the Securities, or face the risk of a legal action which
could be taken by the investors (through the trustee) against the bank within
the framework of the subordinated support agreement between the Bank and
the Issuer.
Headquartered in Almaty, Kazakhstan, Alliance Bank reported total
consolidated total assets of KZT333 billion (US$ 2.5 billion) and shareholders'
equity of KZT28 billion (US$210 million) under IFRS as at 31 December
2005. Following four years of rapid growth, Alliance Bank ranked fifth in
Kazakhstan in terms of total assets and fourth in terms of shareholders'
equity as at end-December 2005 (in accordance with figures reported under
local accounting rules), with a 7.5% share of the system's total assets and
6.6% of shareholders' equity.
Assignments:
.. Issuer: ALB Finance B.V.
. Junior Subordinated Regular Bond/Debenture, Assigned B1
London
Adel Satel
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
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Dmitry Polyakov
Asst Vice President - Analyst
Financial Institutions Group
[2006-03-31]