Moody's assigns Itau Unibanco notes B2

Moody's Investors Service said it assigned a B2(hyb) rating to the additional tier 1 non-viability contingent capital instruments to be issued by Itau Unibanco Holding SA (Cayman Islands) under the company's $100 billion multi-seniority global medium-term note program.

The notes, which will have an optional redemption on the first call date in the fifth year or on any interest payment date thereafter, subject to the approval of the central bank or any other applicable Brazilian governmental authority, are Basel III-compliant and the terms and conditions have been defined with the purpose of qualifying the instrument as additional tier 1 capital pursuant to Brazilian regulations.

“The B2(hyb) rating assigned to the notes is positioned three notches below the ba2 adjusted baseline credit assessment (adjusted BCA) of Itau Unibanco S.A (IU), in line with Moody's standard notching guidance for additional tier 1 securities. Under Moody's framework, one notch reflects the high loss these securities are likely to face in the event of a failure of the bank, due to their deep subordination and limited protection from any residual equity. The two additional notches reflect the higher risk associated with the non-cumulative coupon skip mechanism, which could precede the bank reaching the point of non-viability,” the agency said in a press release.

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