UOB sustainability bond ratings among the highest assigned to banks globally: Moody's and Fitch

Vivienne Tay
Published Fri, Apr 9, 2021 · 04:38 PM

UOB's sustainability bond ratings will likely not see any upward pressure, given they are among the highest assigned to banks globally, Moody's Investors Service and Fitch Ratings said on Thursday.

Positive rating momentum is also limited, given the residual uncertainty in the current environment, Fitch added.

The credit rating agencies separately confirmed their ratings for the dual tranche of 1.25 per cent senior notes due April 2026 and 2 per cent Tier 2 subordinated notes due October 2031.

The senior notes received an Aa1 rating from Moody's and a AA- rating from Fitch, while the subordinated notes received an A2(hyb) rating from Moody's and A rating from Fitch.

Moody's outlook for the sustainability bonds is stable. The Aa1 rating of the senior notes takes into account UOB's a1 baseline credit assessment (BCA) and the ratings agency's estimate of a "very high" probability of public support from the Singapore government for UOB in case of need.

For Fitch, the senior notes are rated at the same level as UOB's AA- long-term issuer default rating, as they constitute direct, unsecured and unsubordinated obligations of the bank.

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The subordinated notes, however, are two notches below Fitch's UOB's aa- viability rating, reflecting higher loss-severity risk relative to senior unsecured instruments due to their subordinated status.

The presence of a non-viability clause and the partial or full write-down feature at the point of non-viability is also a factor in the subordinated notes being rated two notches below UOB's viability rating. Fitch noted that the Monetary Authority of Singapore has sole discretion in determining if UOB is non-viable.

Meanwhile, Moody's A2(hyb) rating for the subordinated notes is one notch lower than UOB's a1 BCA rating, in line with the ratings agency's standard notching for subordinated debt with loss triggered at the point of non-viability on a contractual basis.

On Thursday, UOB raised US$1.5 billion from the US-dollar denominated issuance, with a final order book of US$2.75 billion. The deal is the first sustainability bond offering from Singapore and the first dual-tranche senior and Tier 2 instrument in sustainability format globally from a bank issuer, UOB said.

The sustainability bond offering will be issued under the bank's US$15 billion global medium-term note programme. The expected issue date of the notes is April 14.

UOB shares closed at S$26.07 on Friday, up 0.5 per cent or S$0.12. 

 

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