Fitch rates Renaissance Consumer notes B-

Fitch Ratings said it assigned a final B- rating with a recovery rating of RR5to Renaissance Consumer Funding Ltd.'s 13½% $150 million fixed-coupon 5.5-year subordinated issue of limited recourse loan participation notes with final maturity in June 2018.

The bank has a long-term foreign- and local-currency issuer default ratings of B, national long-term rating of BBB(rus), short-term issuer default rating of B, viability rating of B, senior unsecured long-term debt rating of B with a recovery rating of RR4 and senior unsecured national long-term debt rating of BBB(rus).

The proceeds are being on-lent to Commercial Bank Renaissance Credit (RenCredit), which has a long-term issuer default rating of B, short-term issuer default rating of B and viability rating of B.

In case of bankruptcy, the claims of investors in the current issue will be subordinated to the claims of senior creditors and will rank at least pari passu with the claims of other subordinated creditors. Financial covenants of the agreement include RenCredit's obligation to maintain its prudential capital adequacy ratio at least at 12% level, Fitch said.

The issue rating on the notes acknowledges that banks are often not broken up upon default and that in most cases, holders of subordinated debt receive some level of recoveries when a bank is resolved, the agency said.

The ratings reflect the bank's weaker and more volatile performance relative to other banks in the sector, Fitch said, and significant increase in loss rates in 2012, which has prompted a review of underwriting policies.

However, capital and liquidity remain sound, the agency said.

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