DBRS: BES Sub Debt Ratings Confirmed at C; Removed from URN, Negative Trend; Withdraws Ratings

DBRS Ratings Limited has today confirmed the ratings on the Dated Subordinated Notes of Banco Espírito Santo, S.A. (BES or the Bank) and its related subsidiaries at “C”. At the same time, DBRS has concluded its review, removing the ratings from Under Review Negative (URN). The trend is now Negative. Following these actions, the ratings have been discontinued and withdrawn at DBRS’s discretion, as it considers that there is not sufficient information to maintain the ratings. See full ratings table included at the end of this press release.

In confirming the ratings at “C” with a Negative trend, DBRS notes that BES’s Dated Subordinated Notes have a waiver of one year from 3 August 2014 to cover obligations of payment of coupons and the reimbursement of debt instruments maturing. The Negative trend on the ratings of these securities reflects that there is a high degree of certainty that these instruments will absorb losses, which would push these securities into default. For the time being, the waiver prevents a default until at least 3 August 2015.

The last rating action taken by DBRS on these ratings was on 5 August 2014 following the Bank of Portugal’s announcement of the resolution of BES. At the time, DBRS downgraded the Dated Subordinated Notes issued by BES and its subsidiaries from CC (high) to C to reflect the greater likelihood that these instruments will absorb losses.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (June 2015). Other applicable methodologies include the DBRS Criteria: Support Assessments for Banks and Banking Organisations (March 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2015).These can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company reports, the European Central Bank, European Banking Authority, Bank of Portugal and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: María Rivas
Rating Committee Chair: Elisabeth Rudman
Initial Rating Date: 19 April 2011
Most Recent Rating Update: August 5, 2014

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Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.