Subordinate NYCMWFA SRF bonds, including the series 2018B bonds are secured by subordinate-lien NYCMWFA repayment obligations, moneys available from time-to-time in the general reserve fund, and, on a subordinated
basis, releases from certain other EFC programs.
As of April 20, 2018, EUR12,350,000 worth of the series A-7 junior subordinated
debentures were outstanding and GBP5,500,000 worth of the series A-8 junior subordinated
debentures were outstanding.
Finally, EUR12.4m principal amount of the series A-7 junior subordinated
debentures were outstanding and GBP5.5m total principal amount of the series A-8 junior subordinated
debentures were outstanding, as of 20 April 2018.
The Senior Notes and Subordinated
Notes are being offered under separate prospectus supplements.
The primary driver for the downgrade is the issuer-initiated proposal to convert the "plain vanilla" subordinated
debt security ISIN:XS1003016018 (initial face amount of $400,000,000; coupon 7.850 per cent) into a Basel III-compliant Tier two capital instrument.
Moody's expects the terms and conditions of the subordinated
notes issued under the programme to allow them to qualify as Tier 2 capital under Basel III.
note bears interest at a rate of 10 percent per annum until April 20, 2016 (the maturity date of the subordinated
note) and 20 percent per annum for all periods thereafter.
bond has a maturity of 31 years and will have a first regular call date in year 11.
The statement however added that currently there is no outstanding and rated subordinated
debt for this programme.
According to Basel III, in the future whenever banks issue capital instruments with the nature of bond, such as subordinated
bonds, they must formulate "triggering conditions." Banks must convert the bonds into common shares or cancel the bonds, whenever one of the "triggering conditions" appears, including the equity ratio of common shares drops below 5.125%, loss exceeds one third of the capital, or the regulator takes over the management of the banks.
"Lower Tier 2 debt issued by these leasing companies are rated three notches below their respective National Long-term rating, given weak recovery prospects an investor could expect on investments in these subordinated
debts in the event of default," Fitch said.
It is the first time the largest Japanese securities company has issued subordinated
bonds since it placed 300 billion yen in such bonds in 2008 to stabilize its financial base that was shaken by the financial crisis and to finance its acquisition of some assets from collapsed Lehman Brothers Holdings Inc.