Lloyds Banking Group’s senior unsecured debt ratings were cut to A3 from A2, and its subordinated debt ratings to Baa1 from A3 by Moody’s. The issuer-level ratings and its senior secured ratings were affirmed. The downgrade of its unsecured and subordinated bonds come from Moody’s assessment under its Advanced Loss Given Failure (LGF) analysis. The analysis takes factors in the volume and subordination provided by outstanding senior unsecured debt and more junior liability classes, medium-term funding plans and expected balance sheet evolution. Thus, Moody’s expects a reduction in the “volume of loss-absorbing debt classes” junior to its subordinated bonds, relative to the size of the bank’s balance sheet. They highlight that it may lead to a higher loss severity for subordinated debt. Its LGF analysis therefore indicates a moderate loss-given-failure for senior unsecured debt as compared to a low loss-given failure during its previous analysis.
Lloyds’ USD 7.5% Perp was trading slightly higher at 97.94, up by 0.2 points, yielding 8.67%