SOVEREIGN DEBT RESTRUCTURING | MASTERCLASS

A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

Lloyds Banking Group (LBG) saw its Issuer Default Rating (IDR) and senior debt ratings downgraded to A from A+ by Fitch. Fitch said that the “downgrade of LBG’s IDR and senior debt to the level of its Viability Rating (VR), and of the Tier 2 debt, reflects our expectation that the group’s consolidated qualifying junior debt (QJD) buffer will not be rebuilt and maintained at over 10% of risk-weighted assets (RWA).” The QJD buffer fell to 9.4% of RWA at end-2020 keeping debt buffers lower. Fitch notes that the 10% threshold is the level above which long-term IDR and senior debt ratings “receive uplift”. The IDR of Lloyds Banking Group is now at the level of their Viability Rating (Term of the day, explained below) while its subsidiary Lloyd’s Bank is a notch above its Viability Rating.

Lloyds bonds were stable – its USD 7.5% Perp was at 115.1, yielding 3.7%.

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