S&P takes HDFC Bank's three bond sales off negative watch list

Global rating agency Standard & Poor's (S&P) today removed ratings on senior bonds issued by the Bahrain branch of HDFC Bank from the negative watch list and also affirmed the BBB- rating on the instrument.
S&P affirms its 'BBB-' long-term issue rating on the senior unsecured bonds issued by the Bahrain branch of the bank. "We also remove the ratings from credit watch, wherein they were placed with negative implications on February 22, 2016," S&P said in a statement issued in Singapore.
HDFC Bank had raised money through two tranches from its Bahrain branch at 3 per cent coupon rate. In 2013, it sold USD 595 million bond maturing in 2016 and had raised five-year money worth USD 500 million maturing in 2018. It had also sold three-year Chinese yuan bonds worth 150 million, due 2018, priced at 4.30 per cent.

All these instruments were placed under the negative watch list by S&P on February 22, 2016, citing problems in the host country, Bahrain, which is under political turmoil.
At the same time, the agency said it has raised the Greater China regional scale rating on HDFC Bank's Chinese yuan 150 million bonds priced at 4.30 per cent and maturing in 2018 to 'cnA-' from 'cnBBB+', and also removed it from credit watch where it was placed with developing implications on February 22.
The 'cnA-' Greater China regional scale rating on these bonds is in line with S&P's national and regional scale mapping tables, it said.

"Our rating actions follow HDFC Bank's announcement that it has put in place a structure such that if an event materialises to prevent the bank's Bahrain branch from making payments under the notes, HDFC Bank's Hong Kong branch or a branch in India is obligated to make full and timely payment under these notes.
"We understand that HDFC Bank has already obtained specific approval from the Reserve Bank to make the payment for debt obligations arising from these bonds. With regard to the Hong Kong branch, we are not aware of any regulation that will specifically prohibit the bank from making payment to these bondholders," S&P said.

"We don't consider the ratings on these bonds to be constrained by the rating on Bahrain as they rate such bonds issued by the Bahrain branch at the same level as the rating on HDFC Bank.