DBRS Downgrades BPVI Issuer Rating to SD; Withdraws Ratings following Regulatory Actions

DBRS Ratings Limited (DBRS) has today downgraded Banca Popolare di Vicenza SpA’s (BPVI or the Bank) Issuer Rating to SD from B (high). Concurrently, the Senior Long Term Debt and Deposit rating and Short Term Debt and Deposit rating of BPVI were upgraded to BBB (high) / R-1 (low) with a Stable trend, in line with DBRS’ ratings on Intesa Sanpaolo SpA (Intesa), following the acquisition of these liabilities by Intesa, and withdrawn. The rating on the Bank’s senior debt (ISINs XS0985326502, XS0996671847, XS1047552085, XS1205644047 and XS1339033059) has also been upgraded to BBB (high) with a Stable trend reflecting the transfer of these liabilities to Intesa. These actions conclude the review of the ratings, originally initiated on March 24, 2017.

The withdrawal of the ratings takes into consideration that the Bank has been placed in liquidation. The downgrade of the Bank’s Issuer Rating to Selective Default (SD) follows the burden sharing applied to the Bank’s holders of subordinated bonds as part of the liquidation procedure. The ratings on the State Guaranteed Notes (ISINs IT0005247645 and IT0005238859) were confirmed at BBB (high), with a Stable trend, in line with DBRS’ rating on the Republic of Italy. These obligations have also been acquired by Intesa as part of the transaction.

Today’s rating actions follow the recent developments on BPVI, including the communication of the ECB on June 23, 2017, that the Bank is failing or likely to fail due to a lack of capital, the decision of the European and Italian authorities to wind-down the bank under the Italian liquidation procedure as well as the acquisition by Intesa of certain assets and liabilities of BPVI. The liquidation of the bank is regulated under Law Decree no. 99/2017, which DBRS expects to be converted into law within a sixty day period.

DBRS notes that the purchase agreement of Intesa includes a termination clause which allows Intesa to return these liabilities to the entity in liquidation in the event that the decree is not converted into law or is converted with amendments that make the transaction more onerous for Intesa. DBRS expects the triggering of this clause to be highly unlikely.

RATING DRIVERS
The rating of the deposits and senior debt instruments acquired by Intesa will now move in line with the ratings of Intesa. As a result of the guarantee, the rating of the State Guaranteed Notes will move in line with the ratings of the Republic of Italy.

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, the Ministry of Economy and Finance (MEF), the European Central Bank (ECB), the Single Resolution Board (SRB), the Bank of Italy, the European Commission (EC), Intesa Sanpaolo SpA. 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.

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: December 18, 2013
Most Recent Rating Update: June 1, 2017

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

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