Moody's cranks down ratings on Australasian banks' hybrid securities

Friday 5th March 2010

Moody's Investors Service has followed through on global announcements last November and commenced downgrades on a range of hybrid debt securities offered by Australasian banks.

In an echo of the global financial crisis, Moody's determined that it would no longer offer the same ratings on hybrids as it has on prime debt, after governments around the world made it clear they would not back such paper in the event of bank defaults.

Some 775 different hybrid securities and subordinated debt issues from 170 banks around the world are affected. Australia & New Zealand Banking Group, Commonwealth Bank of Australia and National Australia Bank all announced downgrades from Moody's on a wide range of hybrids offered by their subsidiaries, respectively ANZ National, ASB, and Bank of New Zealand.

ASB's perpetual preference shares are downgraded to A3 from A1 (stable), as are BNZ Income Securities issued in March 2008 and June 2009, while ANZ's New Zealand dollar-denominated perpetual callable subordinated bonds fall from Aa3 to A1.

Moody’s said last November it assumed government support for troubled banks would benefit hybrid and subordinated debt holders, but “in some cases, support packages have been contingent upon a bank's suspension of coupon payments on theseinstruments as a means to preserve capital.”

Businesswire.co.nz

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