S&P rates SBI's USD 10 bn capital raising plan

S&P Global Ratings has assigned 'B+' long-term issue rating to the additional Tier 1 notes and 'BB' long-term issue to the Tier 2 notes under the USD 10 billion medium-term notes (MTN) programme by SBI.
"The issue ratings are subject to our review of the final issuance documentation," S&P said.
The rating on the additional Tier 1 notes is four notches lower than SBI's stand-alone credit profile of 'bbb-'.
This reflects subordination risk and S&P expects the notes to have Tier 1 regulatory capital status and full discretion to cancel interest.
The notes also contain a contractual write-down clause, S&P said, adding that a write-down would occur at point of non-viability.

A write-down may also happen if the bank's common equity Tier 1 ratio falls below 5.5 per cent at any time before March 31, 2019, or below 6.12 per cent from that date on, which we view as a non-viability trigger, it said.

"Once the notes have been issued and are confirmed as part of SBI's Tier 1 capital, we expect to assess them as having intermediate equity content under our criteria.
"This reflects our view that the notes can absorb losses on a going-concern basis through discretionary coupon cancellation, are perpetual, and have no coupon step-up," S&P said.
The rating on the Tier 2 notes is two notches lower than SBI's stand-alone credit profile and reflects subordination risk; and contractual write-down clause.

Also the Tier 2 notes are not likely to absorb losses on a going-concern basis and therefore, we do not expect to assess them as having equity content, S&P said.