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Moody's might upgrade Parex bonds
Moody's Investors Service said it placed the B2 senior unsecured rating on Parex Banka's eurobond issue on review for possible upgrade and its B2 long-term local- and foreign-currency deposit ratings on review for possible downgrade.
On Aug. 1, the Latvian government implemented a restructuring plan for Parex Banka by transferring the bank's performing loan assets, most of its deposits and the eurobond issue to a new bank, Citadele Banka. Moody's understands that the new bank will focus on Latvia and the adjacent Baltic region, while the remainder of Parex Banka will retain non-core assets, specifically non-performing loans.
The review of the eurobonds for possible upgrade reflects Moody's expectation that the credit quality of Citadele Banka will initially be stronger than that of Parex Banka.
The agency said the decision to review the other ratings for possible downgrade reflects the uncertainty surrounding the final form of Parex Banka following the restructuring - in particular, the specific split of assets and liabilities between the two entities and the level of support from the government that the remaining entity is likely to benefit from.
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