ACRA assigns eA+(RU) to (13 series LPN, actual issuer: Alfa Bond Issuance Plc) subordinated eurobonds to be issued by JSC “ALFA-BANK”

Expected credit rating rationale. Alfa Bond Issuance Plc, an Irish SPV, plans to place an LPN issue and provide proceeds from the issue in full as a subordinated loan to JSC “ALFA-BANK” (hereinafter, Alfa-Bank, or the Bank). In ACRA’s opinion, the terms of the issue contain separate provisions that satisfy the concept of a subordinated loan and comply with Bank of Russia Regulation No. 646-P dated July 4, 2018 “On the Methodology for Determining Equity (Capital) of Credit Institutions (Basel III)”. The loan will be included in the Tier 2 capital of the Bank after its disbursement and receipt of the respective approval from the Bank of Russia.

The issue is subordinated debt of the Bank with respect to senior unsecured creditors. The terms of the issue provide for complete write-off of the loan and refusal to pay interest on the eurobonds without the creditor’s right to claim unpaid interest should any of the following events occur: 1) the N1.1 ratio stays below 2% for six or more business days within a continuous period of 30 business days; 2) the Board of Directors of the Bank of Russia approves a plan for the latter’s participation in the implementation of bankruptcy prevention measures with respect to the Bank, or the Committee on Banking Supervision of the Bank of Russia approves a plan for the Deposit Insurance Agency’s participation in the implementation of bankruptcy prevention measures with respect to the Bank. According to ACRA’s methodology, the expected credit rating of this issue type is three notches below the final credit rating of the Bank (AA+(RU)).

The credit rating of Alfa-Bank is based on its strong business profile, strong capital adequacy, adequate liquidity and funding position, and satisfactory risk profile assessment. The rating is further supported by the Bank’s moderate systemic importance for the Russian financial market.

Key issue properties

Borrower

JSC “ALFA-BANK”

Issuer’s credit rating

AА+(RU), outlook Stable

Actual issuer

Alfa Bond Issuance Plc

Type of security

Unsecured eurobonds
(LPN)

Type of debt

Subordinated
(Tier 2 capital)

Maturity

At least 5 years

Regulatory disclosure

ACRA will assign a credit rating to the issue of Eurobonds (13 series LPN, actual issuer: Alfa Bond Issuance Plc) after receiving the final documentation. In case of any significant discrepancies between the final documentation and the preliminary materials, ACRA may change the issue’s credit rating against the expected credit rating.

The expected credit rating has been assigned to the issue of Eurobonds (13 series LPN, actual issuer: Alfa Bond Issuance Plc) under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale of the Russian Federation and the Key Concepts Used by Analytical Credit Rating Agency within the Scope of Its Rating Activities.

An expected credit rating has been assigned to the eurobonds (actual issuer: Alfa Bond Issuance Plc; 13 series LPN of Alfa Bond Issuance Plc) of JSC “ALFA-BANK” for the first time. ACRA expects to assign the final credit rating within 180 days following the publication date of this press release.

The expected credit rating was assigned based on data provided by JSC “ALFA-BANK”, information from publicly available sources, and ACRA’s own databases. The expected credit rating is solicited, and JSC “ALFA-BANK” participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided additional services to JSC “ALFA-BANK”. No conflicts of interest were discovered in the course of the expected credit rating assignment.

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