Moody’s rates Banco Santander (Mexico) notes Baa3(hyb)

Moody's Investors Service said it assigned a Baa3(hyb) foreign currency subordinated debt rating to the proposed dollar-denominated cumulative non-convertible dated loss absorbing tier 2 subordinated preferred capital notes to be issued by Banco Santander (Mexico), SA.

The notes, which may be issued in a total amount of up to $1.3 billion with a maturity of 10 years, have terms and conditions designed to qualify the instruments as tier 2 capital, the agency said.

Santander Mexico's other ratings are not affected by the transaction, Moody’s said.

The proceeds of the notes will be used principally to finance a tender offer for the existing tier 2 subordinated capital notes issued in December 2013.

The Baa3 (hyb) rating is positioned two notches below Santander Mexico's baa1 adjusted baseline credit assessment, in line with Moody's notching guidance for cumulative non-convertible subordinated securities with contractual loss absorption provisions, the agency said.

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