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Fitch Rates UOB's Basel III Tier 2 Subordinated Notes 'A+(EXP)'

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(The following statement was released by the rating agency)
SINGAPORE, August 30 (Fitch) Fitch Ratings has assigned
Singapore-based United
Overseas Bank Limited’s (UOB) proposed US dollar-denominated
Basel III-compliant
Tier 2 subordinated notes an expected rating of ‘A+(EXP)’.
The notes will be issued under the bank’s SGD15bn Euro
medium-term note
programme. The final rating on the securities is subjected to
the receipt of
final documentation conforming to information already received.
KEY RATING DRIVERS
The Basel III-compliant Tier 2 securities are rated one notch
below UOB’s ‘aa-‘
Viability Rating (VR). This reflects their higher loss-severity
risk relative to
senior unsecured instruments, which is due to their subordinated
status, the
presence of a non-viability clause and the partial, rather than
mandatory, full
write-down feature at the point of non-viability.
The Monetary Authority of Singapore has sole discretion in
determining if UOB is
non-viable. If it does so, the notes may be written down in full
or in part to
the extent necessary to restore the bank’s viability. A
write-down of the Tier 2
notes will occur only after any Additional Tier 1 securities
with
loss-absorption features are fully written off, after which the
Tier 2 notes
would be written down pro rata with other parity Tier 2
instruments containing
loss-absorption features. The write-down would be permanent.
No additional notching has been ascribed to non-performance
risk, as Fitch…



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