Moody’s: United Overseas Bank program Baa1

Moody's Investors Service said it assigned a provisional Baa1 rating to the perpetual capital securities component of the existing S$15 billion euro medium-term note program of United Overseas Bank Ltd. (UOB, deposits Aa1 stable, BCA a1).

The agency previously assigned a provisional Aa1 rating to the senior unsecured component, a provisional A3 rating to the subordinated component and a provisional Prime-1 rating to the short-term component of the note program.

The terms and conditions of the capital securities incorporate non-viability language that is compliant with Basel III rules as well as rules set by the Monetary Authority of Singapore (MAS), thereby allowing the securities to be considered as Additional Tier 1 capital, under MAS Notice 637.

The securities can be issued by UOB directly, or by its branches outside Singapore, including United Overseas Bank Ltd., Sydney Branch.

Moody’s said the provisional Baa1 rating is positioned three notches below the a1 adjusted baseline credit assessment (BCA) of the bank, in line with Moody's standard notching guidance for contractual non-viability preferred securities with optional, non-cumulative distribution-skip mechanism.

“The three-notch difference from the adjusted BCA reflects the higher expected loss in these securities and the impairment associated with discretionary coupon suspension,” the agency said in a news release.

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