Fitch Ratings expects to assign Itau Unibanco Holdings S.A.'s (IUH) upcoming 2021 subordinated notes a rating of 'BBB(exp)'. The final rating is contingent upon the receipt of final documents conforming to information already received.
The notes will be issued by IUH's Grand Cayman branch, for an amount not to exceed USD$500 million. Principal will mature in December 2021, and interest payments will be made semi-annually. The notes, part of a USD$10 billion global medium-term note program will carry a fixed interest rate of 6.2%. The net proceeds will be used by IUH for general corporate purposes.
The notes will rank at least equally with similar subordinated debt and carry a cumulative coupon deferral mechanism that can be exercised. This deferral would only occur if IUH is in noncompliance with its regulatory capital requirement.
As per Fitch's new rating criteria, the expected rating of this Tier II subordinated debt should be two notches below IUH's Viability Rating (VR)of 'a-', reflecting one notch down due to loss severity features and its subordinated status and one notch deduction due to the moderate risk of non-performance. IUH's VR reflects Fitch's assessment of its high credit quality and strong prospects for ongoing viability.
The VR rating also reflects IUH's broad and diversified franchise that ranks among the leaders of various segments of the Brazilian financial system. It also considers the quality of its management team, which has demonstrated agility in promptly reacting to economic fluctuations; its track record for solid performance and its robust risk controls, and its ample liquidity and greater diversification compared with local peers due to its overseas presence.
Controlled by the Egydio de Souza Aranha and Moreira Salles families, IUH is the largest private financial conglomerate in Brazil and Latin America and its main subsidiary is one of Brazil's leading retail banks.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Rating Bank Regulatory Capital and Similar Securities' (Dec. 15, 2011);
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011);
--'Itau Unibanco Holding S.A'. (June 18, 2010).
Applicable Criteria and Related Research:
Rating Bank Regulatory Capital and Similar Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656371
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
Itau Unibanco Holding S.A. Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=535055
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