DBRS Downgrades Veneto Banca’s Issuer Rating to SD; Senior Debt remains Under Review Negative

DBRS Ratings Limited (DBRS) has today downgraded Veneto Banca SpA’s (the Issuer or the Bank) Issuer Rating to Selective Default (SD) from B (high). The Bank’s B (high) Senior Long-Term Debt & Deposits Rating and R-4 Short-Term Debt & Deposits Rating remain Under Review with Negative Implications (URN). The ratings on the State Guaranteed Notes remain unchanged at BBB (high), with a Stable trend, in line with DBRS’ rating on the Republic of Italy. DBRS does not rate the Bank’s subordinated debt.

The downgrade of Veneto Banca’s Issuer Rating to SD takes into consideration the deferral of the payment of the Bank’s subordinated debt maturing on June 21, 2017 (Veneto Banca EUR 150 million Subordinated Notes Step-up Lower Tier 2 2007-2017, ISIN: IT0004241078) following the approval by the Italian Government, on June 16, 2017, of the Law Decree (No. 89/2017).

In particular, according to the Law Decree No. 89/2017, which DBRS expects to be converted into law by August 16, 2017, the payment of all subordinated notes issued by banks which applied for State Aid in the form of precautionary recapitalisation are delayed for a period of six months since the application for State Aid. This is to ensure that all holders of subordinated debt will be treated equally if a bank receives State Aid. In the case of Veneto Banca, which has expressed its intention to apply for State Aid on March 17, 2017, the payment of the subordinated bond (ISIN: IT0004241078), as communicated to the market, has been delayed to September 17, 2017 (or September 18, 2017 which is the first business day after September 17, 2017). During this period, however, the subordinated bond will continue to pay interest.

In downgrading the Bank’s Issuer Rating, DBRS notes that it considers the postponement of the payment of the subordinated bond (ISIN: IT0004241078) as a failure to satisfy an obligation on a debt issue. The Selective Default (SD) reflects the fact that this decision has specifically affected only the subordinated debt. Negotiations are continuing with regards to the Bank’s future, and DBRS expects greater clarity to emerge within coming days.

RATING DRIVERS
DBRS ratings on the Bank’s Senior Long-Term Debt & Deposits Rating and Short-Term Debt & Deposits Rating at B (high) / R-4 remain Under Review with Negative Implications. The URN reflects the ongoing uncertainty over the Bank and its protracted recapitalisation and restructuring.

Notes:
All figures are in Euros unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (May 2017). Other applicable methodologies include the DBRS Criteria: Guarantees and Other Forms of Support (February 2017). These can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include company documents, the Italian Government and the Ministry of Economy and Finance (MEF). DBRS considers the information available to it for the purposes of providing this rating to be 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.

This rating is under review. Generally, the conditions that lead to the assignment of reviews are resolved within a 90 day period. DBRS reviews and ratings are under regular surveillance.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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: Nicola De Caro, Vice President – Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director, Head of EU FIG - Global FIG

Initial Rating Date: May 13, 2013
Most Recent Rating Update: June 1, 2017

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