Moody's decided to improve to "positive" the outlook of the rating granted to Novo Banco's long-term deposits. It had postponed the decision twice.
Moody’s has already reached a decision about the rating granted to Novo Banco’s long-term deposits. The agency improved to “positive” the rating outlook of the Portuguese bank’s long-term deposits. This confirms the “Caa1” rating granted to Novo Banco, seven levels below a quality rating.
The agency had placed this rating “under review” on April 5th of last year, on the same day it decreased the rating given to the bank’s senior debt. This concerned the bond repurchase programme, in which creditors agreed to exchange 4.74 billion euros for bonds in Novo Banco. Moody’s was afraid that senior bondholders would suffer losses from the operation, threatening to lower the rating for long-term deposits.
But that was not the case. Over a year after beginning the revision process, Moody’s decided to improve to “positive” the outlook for Novo Banco’s long-term deposits, keeping them, however, seven levels below an investment grade. “This rating action concludes the rating review on the long-term deposit ratings that was initiated on 5 April 2017 and extended on 6 October 2017 and 22 February 2018”, Novo Banco states.
In a press release sent this Monday to CMVM, Novo Banco states that “the rating action is triggered by the disclosure of the 2017 audited financial statements and reflects Moody’s assessment of the Bank’s liability structure at year-end 2017, incorporating the changes to its balance sheet following the completion of the liability management exercise (LME) on 4 October 2017″, which allowed the bank to be sold to Lone Star.
While the rating for deposits is no longer under review, but stands at a Caa1 level with a positive outlook, the rating granted to Novo Banco’s debt was kept at Caa2 (also with a positive outlook), eight levels below an investment grade.