Azerbaijan, Baku, Feb. 21 / Trend E. Kosolapova/
Fitch Ratings has upgraded the subordinated debt ratings of Kazakhstan's Kazkommertsbank (KKB, 'B'/Stable/'b') to 'B-'/RR5 from 'CCC'/RR6.
"The bank's other ratings were unaffected by the current rating actions," Fitch said.
The rating actions follow the publication in December 2012 of Fitch's revised criteria 'Assessing and Rating Bank Subordinated and Hybrid Securities'. According to this criteria, for gone concern securities that are only supposed to absorb losses upon failure/at the point of non-viability, the base case notching will be one below an issuer's Viability Rating (VR) throughout the rating scale.
As Fitch views KKB's subordinated debt issues as gone concern securities (i.e. designed to absorb losses only at the point of failure), these are now notched once off the banks' VRs.
Fitch's old methodology for rating subordinated debt of issuers rated 'B+' or lower involved conducting a bespoke break-up analysis of the bank's balance sheet upon default. This analysis typically resulted in forecasted recoveries of zero for subordinated debt, resulting in the assignment of an 'RR6' Recovery Rating and a debt rating two notches below the bank's VR. The revised methodology acknowledges that banks are often not broken up (liquidated) upon default and that in most (although not all) cases holders of subordinated debt receive some level of recoveries when a bank is resolved.
The revision of the bank's securities' Recovery Ratings to 'RR5' (corresponding to average recoveries of 10-30 percent) reflects this change in approach, and has driven the upgrade of KKB's subordinated debt ratings.
According to Fitch, the subordinated debt ratings of the bank could be upgraded or downgraded if the bank's VRs are upgraded/downgraded.