Moody's rates Vneshtorgbank note A2

Moody's Investors Service said it assigned an A2 foreign-currency debt rating to the $1.75 billion series 10 floating-rate loan participation notes issued by VTB Capital SA for the sole purpose of financing a fiduciary deposit with Deutsche Bank Luxembourg SA, which is being made for the sole purpose of financing a senior unsecured loan to Russia-based Vneshtorgbank.

The outlook is stable.

Moody's said the A2 rating is based on Vneshtorgbank's fundamental credit quality and takes account of all relevant country risks. As Russia's second-largest taker of retail deposits, Vneshtorgbank plays a vital role in the banking system, in the national economy and to some extent on the international scene through various European Union-based subsidiary banks that it acquired from the Central Bank of Russia. The agency said it believes that the Russian authorities are firmly committed to supporting Vneshtorgbank in the event of difficulty.

However, the rating also reflects the probability of a sovereign default implied by the Russian government's low investment-grade Baa2 foreign-currency bond rating, the likelihood that the Russian government could impose a debt moratorium in the event of default on its own foreign-currency obligations and the risk that any such moratorium might particularly affect Vneshtorgbank's bonds, the agency said.

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