Moody’s assigns B1(hyb) rating for Axis Bank’s proposed AT1 bonds

Moody’s assigns B1(hyb) rating for Axis Bank’s proposed AT1 bonds

Global rating company Moody’s rated Axis Bank’s proposed offshore Additional Tier 1 bonds, which is expected to open for subscription this week. The rank is deeper into the junk category that will likely fetch relatively higher rates for potential investors.

Global Rating company Moody’s has assigned B1(hyb) or (B+ in simple rating terminology) grade to private sector lender Axis Bank’s proposed Additional Tier 1 bonds. The rating rank is three notches lower than the bank’s general creditworthiness.

“Axis Bank’s BCA could be upgraded if there is an improvement in asset quality, as reflected in the bank being able to maintain credit costs below its long-run average,” Moody’s said in a note.

“Axis’ BCA could be downgraded if there is a significant weakening in its asset quality, with negative implications on capital and profitability, or if funding weakens as reflected by a deterioration in retail deposits.”

Earlier on August 25, ET reported that Axis Bank was planning to raise up to $1 billion through its maiden offshore AT1 papers, supposedly ESG (Environment Social Governance) complaint.

However, the ESG tag could well arrest any sudden rise in the borrowing cost.

The principal and any accrued but unpaid distributions on these capital securities would also be written down, partially or in full, if Axis Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1 October, 2021.

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