Business Daily from THE HINDU group of publications
Tuesday, Jun 19, 2007
ePaper
Business Daily from THE HINDU group of publications Tuesday, Jun 19, 2007 ePaper |
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Money & Banking
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Corporate Bonds
Our Bureau
Mumbai June 18 Global rating agency Standard & Poor's assigned its `BB' rating to State Bank of India's proposed $225-million Hybrid Tier I perpetual bonds indicating it as non-investment grade. The bonds would be issued under its $5-billion Medium Term Notes (MTN) programme. The bonds will be perpetual notes with a call option of 10 years from the date of issue, said a press release from Standard & Poor's. The rating differential between the `BBB-' counter party credit rating and the `BB' rating on the Hybrid Tier I notes reflects the junior subordinated nature of the notes and the embedded interest deferral feature, said the release. A senior SBI official said: "banks do not get a rating better than `BB' for its perpetual debt which are less attractive than the senior unsecured bonds. We had raised around $400 million in the overseas market with the same rating in the month of February so we don't see any problem in raising the $225 million." The S&P release said the interest deferral feature is linked to compliance with the regulatory capital adequacy ratio (RCAR) and a profit test. If SBI Bank's RCAR is below the minimum regulatory requirement stipulated by the Reserve Bank of India, it will be mandatory to skip interest payments. The bank's RCAR stands at 12.34 per cent as on March 31, 2007. If the bank is in compliance with RCAR but reports a "net loss'', it will require RBI's permission before it can make interest payments on the notes, the release added.
More Stories on : Corporate Bonds | Credit Rating | Public Sector Banks | State Bank of India
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