The Hindu Business Line : ICICI Bank's hybrid tier-I securities rated `BB-'

Standard & Poor's Ratings Services has assigned `BB-' rating to the hybrid Tier-I securities to be issued by ICICI Bank. ICICI Bank has a foreign currency BB+/Positive/B credit rating from Standard & Poor.

A press release from Standard & Poor's explains that the difference between the "BB-" for the issue and the "BB+" foreign currency credit rating for ICICI Bank is due to the subordinated nature of the notes and embedded interest deferral feature. The press release said the proposed hybrid Tier-I notes are perpetual non-cumulative subordinated debt securities with a call option of 10 years from the date of issue. The subordination feature reflects the payment obligation towards the securities that is junior to the claims of the senior and subordinated debt holders and senior to the claims of the preference and equity shareholders of ICICI Bank.

Interest Deferral

The release explained that interest deferral is based on compliance with the regulatory capital adequacy ratio (RCAR) and an earnings test. The RCAR is currently 9 per cent of risk-weighted assets. ICICI Bank has adopted the RBI's definition of "net loss" as the relevant profit test.

If ICICI Bank is not in compliance with the RCAR; it would be mandatory to skip interest payment. If ICICI Bank is in compliance with the RCAR but it has a net loss, it would need the RBI's permission to make interest payment. In other words, the RBI has the option to permit ICICI Bank make the interest payment, it added.

More Stories on : Credit Rating | Private Banks | Overseas Borrowings | ICICI Bank Ltd

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