Fitch rates Old Mutual South Africa bond AA(zaf)

Fitch Ratings said it assigned a final rating of AA(zaf) to Old Mutual Life Assurance Co. South Africa’s ZAR 2.061 billion issues of subordinated debt securities.

The notes are rated two notches below the company’s national long-term rating of AAA(zaf) to reflect their subordination and loss absorption features, the agency said.

The unsecured subordinated callable securities were issued in four tranches consisting of ZAR 537 million floating-rate notes with a coupon of three-month JIBAR + 230 basis points due March 19, 2025 and callable after five years; ZAR 425 million fixed-rate notes with a coupon of 9.76% paid semi-annually in arrears due March 19, 2025 and callable after five years; ZAR 409 million fixed-rate notes with a coupon of 10.32% paid semi-annually in arrears due March 19, 2027 and callable after seven years; ZAR 690 million fixed rate notes with a coupon of 10.955% paid semi-annually in arrears due March 19, 2030 and callable after 10 years.

All four tranches have a step-up in the coupon after their respective first call dates, Fitch said.

This subordinated bond is classified as 100% capital due to regulatory override within the agency’s risk-based capital calculation and is classified as 100% debt for the agency’s financial leverage calculations, Fitch added.

The ratings are notched down from the issuer’s rating and are therefore sensitive to changes in the company’s national long-term rating, the agency said.

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