(The following statement was released by the rating agency)
Aug 24 – Fitch Ratings has assigned South Africa-based Liberty
Group Limited’s (LGL, National IFS ‘AA(zaf)’/Stable) issue of subordinated debt
securities a rating of ‘A+(zaf)’, in line with Fitch’s standard notching
practices.
The ZAR1bn issue is part of the group’s active capital management and takes into
account the refinancing of LGL’s current outstanding bond. This involves the
redemption of LGL’s outstanding ZAR2bn subordinated bond at 8.93% coupon,
callable on 12 September 2012 with a maturity date of 12 September 2017. The
issue leads to a temporary increase in the group’s financial leverage from 14%
to 19% during the overlap period of August to September 2012. During this
period, LGL has two subordinated bonds, an existing bond of ZAR2bn and a new
bond of ZAR1bn. Thereafter the financial leverage ratios are expected to drop to
8%, which Fitch considers low for LGL’s rating.
The issue is not callable and has its final maturity date on the 13 August 2017.
The securities pay a fixed annual coupon of 7.67% semi-annually for 5 years. The
notes have no interest deferral features or other loss absorption features.
The subordinated bond has been structured for Tier 2 own funds eligibility
according to the grandfathering provisions of the QIS2 specifications under the
Solvency Assessment and Management regime, South Africa’s equivalence of
Solvency II. According to Fitch’s methodology, this subordinated bond is
classified as 100% capital due to regulatory override within Fitch’s risk-based
capital assessment and is classified as 100% debt regarding the agency’s
financial leverage calculations.
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