Moody’s rates Absa notes B2(hyb)

Moody's Investors Service said it assigned a B2(hyb) foreign currency rating to Absa Group Ltd.'s proposed benchmark-size issuance of fixed-rate reset write-off notes, which will be classified as additional tier 1 capital.

The rating is positioned three notches below the ba2 adjusted baseline credit assessment of Absa Group's main operating subsidiary, ABSA Bank Ltd.

“This is in line with Moody's standard notching guidance for contractual non-viability securities and captures the increased loss severity associated with subordinated obligation and the greater uncertainty associated with the timing to principal write-down,” the agency said in a news release.

Additionally, as these securities may be forced to absorb losses near the point of non-viability as a way for the bank to avoid a bank wide resolution, the rating positioning also captures the probability of impairment associated with non-cumulative coupon suspension, which could happen before the bank reaches the point of non-viability, Moody’s said.

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