Moody's assigns B1(hyb) to Axis Bank's proposed AT1 capital securities

Moody's has assigned B1(hyb) rating to Axis Bank Ltd GIFT City branch's proposed USD-denominated, undated, non-cumulative and subordinated additional tier 1 (AT1) capital securities being issued out of its global medium term note (GMTN) programme.

Moody's has also assigned (P)B1 Pref. Stock Non-cumulative programme rating to the AT1 capital securities component of its GMTN programme.

The B1(hyb) rating and (P)B1 program rating is three notches below Axis Bank Ltd's ba1 baseline credit assessment (BCA) and adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension as well as the likelihood of high loss severity when the bank reaches the point of non-viability.

The principal and any accrued but unpaid distribution on these capital securities would also be written down partially or in full if the RBI determines that without such a write-down, the bank would become non-viable, or a public sector capital injection is needed without which the bank would become non-viable.

In addition, the AT1 securities will be written down in full if the RBI decides to reconstitute or amalgamate the bank with another bank, pursuant to section 45 of the Banking Regulation Act 1949. In both these scenarios, the write-down will be permanent.

The principal and any accrued but unpaid distributions on these capital securities would also be written down partially or in full if Axis Bank's common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to October 1 and 6.125 per cent from and including October 1.

In such a scenario, the write-down may be temporary and the amount could be reinstated subject to the Reserve Bank of India's (RBI's) conditions.

Furthermore, Axis Bank as a going concern may choose not to pay interest on these securities on a non-cumulative basis. However, a common share dividend stopper applies if an interest payment is missed.