Moody's rates notes to be is­sued by Stan­dard Life Plc

The Pak Banker - - Front Page -


Global rat­ing agency Moody's has as­signed a Baa2(hyb) rat­ing to the dated subor­di­nated notes to be is­sued by Stan­dard Life Plc (SL).

The rat­ing is based on the ex­pec­ta­tion that there will be no ma­te­rial dif­fer­ence be­tween cur­rent and fi­nal doc­u­men­ta­tion in re­la­tion to the notes.

The out­look is sta­ble in line with those of SL and the main op­er­at­ing com­pany, Stan­dard Life As­sur­ance Lim­ited (SLAL). The un­guar­an­teed subor­di­nated notes are is­sued un­der the EMTN pro­gramme and rank subor­di­nated to the se­nior cred­i­tors of SL.

The Baa2(hyb) rat­ing is driven by the A1 IFSR of SLAL, and the four notch gap be­tween SLAL's IFSR and the hold­ing com­pany subor­di­nated debt rat­ing is con­sis­tent with Moody's typ­i­cal notch­ing prac­tice for Euro­pean in­surance com­pa­nies.

This will be the first un­guar­an­teed hy­brid cap­i­tal is­sue by Stan­dard Life Plc.

The pro­ceeds will be used for gen­eral cor­po­rate pur­poses, although we note that the subor­di­nated Euro 750m in­stru­ment which was ten­dered in H2 2011 (with the stub called in July 2012) was not im­me­di­ately re­fi­nanced.

The new notes will qual­ify as reg­u­la­tory cap­i­tal un­der the ex­ist­ing Sol­vency I rules and are de­signed to qual­ify as Tier Two reg­u­la­tory cap­i­tal un­der the forth­com­ing Sol­vency II regime.

The notes will re­ceive some eq­uity credit from Moody's based on the 30 year ma­tu­rity of the notes. The notes con­tain a manda­tory in­ter­est de­fer­ral trig­ger based upon breach of reg­u­la­tory cap­i­tal re­quire­ments. Un­der the ex­ist­ing EU Sol­vency I rules, Moody's re­gards this trig­ger as weak.

The terms of the bond al­low the trig­ger to switch to the Sol­vency II cap­i­tal re­quire­ments when the Sol­vency II reg­u­la­tions are ac­ti­vated.

As Sol­vency II is de­signed to be a more rig­or­ous sol­vency regime, Moody's view on the strength of the trig­ger may change.

Moody's ex­pects to pub­lish guid­ance on how it will as­sess the new Sol­vency II trig­gers within the con­text of rat­ings, eq­uity credit and the im­ple­men­ta­tion timetable in due course.

The coupons on the new in­stru­ment are fully de­ferrable on an op­tional ba­sis.

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