Fitch assigns expected 'A+' rating to OCBC's subordinated notes

The rating on the Subordinated Notes—due 2022 callable in 2017—is one notch below OCBC's 'AA-' Long-term foreign-currency Issuer Default Rating (IDR).

In a statement, the ratings agency said the issue's expected rating reflects the subordinated status of the Notes and the absence of any going concern loss absorption mechanism. This is in accordance with the agency's criteria of rating subordinated debt instruments of financial institutions.

The Subordinated Notes are intended to represent direct, subordinated and unsecured obligations of the bank and to rank pari passu with its other Lower Tier 2 capital instruments. The rights of the Subordinated Notes holders will rank after the claims of OCBC's senior creditors, including depositors, but they will rank senior to holders of the bank's share capital, Tier 1 capital securities and Upper Tier 2 capital securities.

While qualifying as regulatory capital, the Subordinated Notes are not intended to contain any going concern loss absorption features, such as a coupon deferral under specified conditions, which otherwise would have resulted in wider notching for the issue's expected rating.

The proceeds will be used for OCBC's general corporate purposes and to expand its regulatory capital base. The Subordinated Notes are expected to qualify as Lower Tier 2 capital as per the Monetary Authority of Singapore's guidelines.

Established in 1932, OCBC is a Singapore-based, listed banking group. It has been expanding within Asia over the past few years. Singapore and Malaysia continue to account for the bulk of its total assets - 85% at 30 September 2010.