S&P applies BBB+ to CBA notes

Standard & Poor's said it assigned its BBB+ long-term issue credit rating to the Commonwealth Bank of Australia Ltd.'s (CBA) subordinated notes, to be issued under its $70 billion European medium-term note program.

The proposed notes are rated two notches below CBA's standalone credit profile of a. This issue rating reflects the securities' risk of subordination, and a contingency clause under which the bank must convert the notes to common equity or write them off in the unlikely event that a non-viability trigger is activated, S&P said.

The proposed notes will qualify for "minimal" equity content, reflecting the agency’s view that these notes do not have the ability to absorb losses, if needed, on a "going-concern basis" through nonpayment of coupons, principal write-down or conversion into common equity, and that the instruments are not mandatorily convertible into common equity before the bank is at, or close to, the point of non-viability.

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