RAM Ratings upgrades ratings of EON Bank’s debt securities, withdraws financial institution ratings

Published on 01 July 2011

RAM Ratings has upgraded the rating of EON Bank Berhad’s (EON Bank or the Group) Innovative Tier-1 Capital Securities Issuance Programme of up to RM1 billion to AA3 from A3. Concurrently, the rating of Subordinated Medium-Term Notes (MTN) Issuance Programme of up to RM2 billion has also been upgraded to AA2 from A2. Both the long-term ratings carry a stable outlook.

The ratings upgrade is premised on the credit standing of the new obligor of EON Bank’s debt securities, i.e. Hong Leong Bank Berhad (Hong Leong Bank), whose financial institution ratings of AA1/Stable/P1 were reaffirmed on 29 April 2011. Pursuant to the vesting order granted by the High Court on 17 June 2011, all the assets and liabilities of EON Bank are to be transferred to Hong Leong Bank on 1 July 2011.

The 1-notch rating differential between Hong Leong Bank’s AA1 long-term financial institution rating and the AA2 rating of its Subordinated MTN Issuance Programme reflects the subordination of the debt facility to the Group’s senior unsecured obligations. Meanwhile, the 2-notch rating differential between Hong Leong Bank’s long-term financial institution rating and the AA3 rating of its Innovative Tier-1 Capital Securities Issuance Programme reflects the deeply subordinated nature of the latter and its embedded interest-deferral feature.

RAM Ratings has withdrawn the A1/P1 financial institution ratings of EON Bank with immediate effect. As such, we no longer have any rating obligations on the Group.

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Amy Lo
(603) 7628 1078
amy@ram.com.my