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Moody's Downgrades Greek Hybrid Securities As It Kills Its Assumptions About Government Bail Outs Of Subordinated Holders

Tyler Durden's picture





 

The barrage on Greek financial institutions continues, with Moody's downgrading Greek bank hybrid securities. Those impacted include National Bank of Greece, EFG Eurobank Ergasias, Piraeus Bank and Alpha Bank. The rating agency mainains a negative outlook on the bank's Baseline Credit Assessment, whatever the hell that is. The basis for the rating action is presented as follows: "Prior to the global financial crisis, Moody's incorporated an assumption into its ratings that support provided by national governments and central banks to shore up a troubled bank would, to some extent, benefit the subordinated debt holders as well as the senior creditors. The systemic support for these instruments has not been forthcoming in many cases. The revised methodology largely removes previous assumptions of systemic support, resulting in today's downgrades. In addition, the revised methodology generally widens the notching on a hybrid's rating, based on the instrument's features." Is this a preamble to yet another general downgrade by Moody's on the country? Should the Greek Moody's rating drop to A1 or below, the Titlos SPV downgrade cascade consequences, as discussed previously, could come to the fore very promptly.

From the report:

The starting point in Moody's revised approach to rating hybrid securities is the Adjusted BCA. The Adjusted BCA reflects the bank's standalone credit strength, including parental and/or cooperative support, if applicable. The Adjusted BCA excludes systemic support.

Greek banks' preferred securities are largely similar with common decisive features (in terms of credit risk). They are all non-cumulative, perpetual securities with both optional and mandatory coupon skip mechanisms tied to breach of a balance sheet loss. In liquidation, the securities are deeply subordinated, ranking only senior to common equity. All rated instruments qualify as Tier 1 capital as per the rules set out by the Bank of Greece. Based on Moody's revised methodology, these instruments are now rated three notches below the relevant issuing bank's Adjusted BCA (all four Greek banks that have outstanding rated preferred securities do not benefit from parental support, so their Adjusted BCA is the same as their BCA).

The following securities have been affected:

National Bank of Greece

Adjusted BCA: A3

- Series A non-cumulative preferred securities (ISIN US6336435077): Downgraded to Baa3 from A2.

National Bank of Greece Funding Limited

- Series A non-cumulative preferred securities (ISIN XS0172122904): Downgraded to Baa3 from A2, Series B noncumulative preferred securities (ISIN XS0203171755): Downgraded to Baa3 from A2, Series C non-cumulative preferred securities (ISIN XS0203173298): Downgraded to Baa3 from A2, Series D non-cumulative preferred securities (ISIN XS0211489207): Downgraded to Baa3 from A2, Series E non-cumulative preferred securities (ISIN XS0272106351): Downgraded to Baa3 from A2.

EFG Eurobank Ergasias

Adjusted BCA: Baa1

EFG Hellas Funding Limited issued the following hybrid securities guaranteed by EFG Eurobank Ergasias:

- Series A non-cumulative preferred securities (ISIN DE000A0DZVJ6): Downgraded to Ba1 from A3, Series B noncumulative preferred securities (ISIN XS0232848399): Downgraded to Ba1 from A3, Series C non-cumulative preferred securities (ISIN  XS0234821345): Downgraded to Ba1 from A3, Series D non-cumulative preferred securities (ISIN XS0440371903): Downgraded to Ba1 from A3.

Alpha Bank S.A.

Adjusted BCA: Baa1

Alpha Group Jersey Limited issued the following hybrid securities guaranteed by Alpha Bank S.A:

- Series A non-cumulative preferred securities (ISIN XS0159153823): Downgraded to Ba1 from Baa1, Series B noncumulative
preferred securities (ISIN DE000A0DX3M2): Downgraded to Ba1 from Baa1.

Piraeus Bank S.A.

Adjusted BCA: Baa1

Piraeus Group Capital Limited issued the following hybrid securities guaranteed by Piraeus Bank S.A:

- Series A non-cumulative preferred securities (ISIN XS0204397425) which were downgraded to Ba1 from Baa1. The last rating actions on National Bank of Greece, EFG Eurobank Ergasias and Alpha Bank were implemented on 22 December 2009 when Moody's took the following actions: The BFSR of National Bank of Greece was downgraded to C from C+, its long-term deposit and senior debt rating to A1 from Aa3 and subordinated debt rating to A2 from A1. The outlook on all ratings remained negative. The BFSR of EFG Eurobank Ergasias was downgraded to C- from C, its long-term deposit and senior debt rating to A2 from A1 and subordinated debt rating to A3 from A2. The outlook on all ratings except the BFSR remained negative. The Government Guaranteed debt of Alpha Bank was downgraded to A2 from A1 and outlook remained negative.

The last rating action on Piraeus Bank was implemented on 3 February 2009, when the bank's BFSR was downgraded to C- from C, it long-term deposit and senior debt ratings were lowered to A2 from A1 and its subordinated debt rating was lowered to A3 from A2.

The principal methodologies used in rating these issuers are Moody's "Bank Financial Strength Ratings: Global Methodology", published in February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007, and "Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt", published in November 2009, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

Headquartered in Athens, Greece, National Bank of Greece SA reported total assets of EUR112.2 billion at the end of September 2009. Headquartered in Athens, Greece, EFG Eurobank Ergasias reported total assets of EUR84.3 billion at the end of September 2009. Headquartered in Athens, Greece, Alpha Bank SA reported total assets of EUR68.8 billion at the end of September 2009. Headquartered in Athens, Greece, Piraeus Bank reported total assets of EUR52.2 billion at the end of September 2009.

 

 


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Wed, 02/17/2010 - 13:52 | Link to Comment Anonymous
Wed, 02/17/2010 - 21:50 | Link to Comment MarketTruth
MarketTruth's picture

Greek Ex-Minister
"Other Euro Countries Did Swaps Too"

www.cnbc.com/id/35438321

Bye bye Euro [End]Zone

Wed, 02/17/2010 - 13:52 | Link to Comment Anonymous
Wed, 02/17/2010 - 14:01 | Link to Comment 4shzl
4shzl's picture

Studiously ignoring the deathly white object in the water dead ahead, Moody's diligently inspects the paint job on the afterdeck, finds it to be substandard, and reports to passengers accordingly.

Wed, 02/17/2010 - 14:15 | Link to Comment yabs
yabs's picture

This stock market seems to operate on a different planet

Wed, 02/17/2010 - 14:29 | Link to Comment Anonymous
Wed, 02/17/2010 - 15:17 | Link to Comment bugs_
bugs_'s picture

Jean-Claude you have a phone call from "Deep Shah" on line 5.

Wed, 02/17/2010 - 15:22 | Link to Comment ShankyS
ShankyS's picture

So, S&P based ratings on ASSumptions that there would be a backstop.

OK, sure. I get it.

Wed, 02/17/2010 - 16:21 | Link to Comment BaseLine
BaseLine's picture

FACT - between 1800 and 1912, the average annual inflation rate was - 0.35% (doubling time NEVER!). From 1913 to now average annual inflation rate 3.4% (doubling time about 20.6 years).

Wed, 02/17/2010 - 17:29 | Link to Comment faustian bargain
faustian bargain's picture

It'd be funny to put this on a big sign at the entrance to every Walmart in the country.

Wed, 02/17/2010 - 16:27 | Link to Comment Anonymous
Wed, 02/17/2010 - 18:51 | Link to Comment BaseLine
BaseLine's picture

Doesn't hurt that Paulson and Soros news came out about financial holdings, perfect time for them to dump.

Good articles: http://www.iamned.com
Financial Dictatorship where Wall Street Banksters Owns Congress? read this: http://bartspace12.blogspot.com/2010/02/deficits-unpaid-banks-fed-move.html

Mon, 04/19/2010 - 08:38 | Link to Comment Tom123456
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