Fitch gives junk status to CGD’s issued debt

  • ECO News
  • 6 April 2017

The rating assigned by Fitch to CGD's perpetual debt securities is three notches below CGD's viability rating, in accordance to Fitch's criteria.

Fitch has assigned this Wednesday a ‘B-‘ rating — the sixth within the non-investment or ‘junk’ status — to CGD‘s debt issued in March for its own recapitalization, worth 500 million euros.

The rating given by the agency to these perpetual debt securities (of high subordination, which is included in capital) is three notches below the viability rating Fitch gave Caixa Geral de Depósitos (CGD), of ‘bb-‘, also in the junk status.

The agency justifies that the rating they attributed complies with the usual criteria used for hybrid instruments (debt accounted for in capital), as well as a “higher expected loss” relative to senior unsecured creditors and a “higher non-performance risk”, since these securities imply “the full discretionary coupon payment”.

Caixa Geral de Depósitos issued, on March 23, 500 million euros in perpetual debt through institutional investors, with a 10.75% interest rate. This debt issuance is part of the public bank’s recapitalization plan, worth 5,000 million euros, after having presented 1.859 million euros’ losses in 2016.