S&P gives RBC tier 1 notes BBB

S&P said it assigned its BBB issue-level rating to Royal Bank of Canada’s Canadian dollar-denominated additional tier 1 structure limited recourse capital notes.

Under this structure, RBC established a trust where the bank is the sole beneficiary. Investors of the notes will have recourse only to the assets held by the trust. At the same time, S&P assigned a BBB issue-level rating to the bank’s preferred shares, which will reside in the trust, the agency said.

The BBB rating is four notches below RBC’s stand-alone credit profile of a+. S&P deducts a notch for the subordination, two notches for coupon payments RBC can cancel at its discretion and another for a nonviability trigger that would convert the notes into common equity, S&P said.

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