Fitch Rates Uzbek Industrial and Construction Bank Upcoming Eurobonds at ‘BB-(EXP)’
Tashkent, Uzbekistan (UzDaily.com) -- Fitch Ratings has assigned Uzbek Industrial and Construction Bank Joint-Stock Commercial Bank (UICB) planned senior unsecured Eurobond issue an expected long-term rating of ‘BB-(EXP)’.
Assigning final ratings to the issue is contingent upon receipt by Fitch of the final documentation conforming to the information already received from the issuer.
UICB’s first US dollar-denominated Eurobonds are expected to be fixed rate bonds, with a maturity of five years. The proceeds are to be used for general corporate purposes.
The planned issue is expected to be rated in line with UICB’s ‘BB-’ Long-Term Issuer Default Rating (IDR), which is driven by state support. The IDR is equalised with that of the sovereign and reflects majority state ownership, the low cost of potential support relative to the sovereign’s international reserves, the bank’s policy role and a track record of capital and liquidity support provided to the bank in the last few years.
A planned partial transfer of directed loans to the Uzbekistan Fund for Reconstruction and Development (UFRD) may somewhat weaken the bank’s policy role, but in Fitch’s view this should not have a material impact on the propensity of the state to support the bank. UICB remains a large systemically important bank with strategic state ownership and continues to receive capital and funding support from the government.
The terms of the proposed Eurobond include financial covenants relating to UICB’s compliance with regulatory capital ratios and dividend payments. A put option gives bondholders the right to seek early repayment in the event that the Republic of Uzbekistan ceases to control at least 50% plus one share of UICB’s common stock. Privatisation of UICB has been announced, envisaging the sale of a minority stake to foreign investors, but the time frame for proposed privatisation is unknown.
The planned privatisation does not alter our near-term view of the authorities’ willingness to provide support to state-owned banks if required. The terms also contain provisions for a call option that can be exercised by the issuer at any time prior to the maturity date.