04.12.2012 08:07
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Credit Europe Bank Ltd. -- Moody's assigns B1 subordinated debt rating to Credit Europe Bank Ltd's $250 million loan participation notes; outlook positive

London, 04 December 2012 -- Moody's Investors Service has today assigned a B1 long-term foreign currency subordinated debt rating to the $250 million loan participation notes issued by Russian-based Credit Europe Bank Ltd (Ba3, local-currency deposits, positive; BFSR D-/BCA ba3, stable). The notes were issued on a limited recourse basis by the bank's Luxembourg-based special purpose vehicle, CEB Capital S.A., for the sole purpose of financing a seven-year subordinated loan to Credit Europe Bank Ltd. The outlook on the subordinated debt rating is positive.

RATINGS RATIONALE

Moody's says that the B1 rating assigned to Credit Europe Bank Ltd's subordinated notes, which is one notch lower than the bank's Ba3 senior unsecured debt rating, takes into account (1) the extent of the notes' subordination against various classes of debt, and (2) associated differences in expected loss in case of default.

Key features which drive the rating outcome on Credit Europe Bank Ltd's notes are (1) the maturity of seven years; (2) $250 million issuance volume; and (3) subordination in liquidation. In the event of bankruptcy or liquidation of Credit Europe Bank Ltd, the notes will rank junior to all senior debt; pari passu with subordinated debt, and senior to holders of common stock. Moody's expects that the subordinated debt -- to be authorised by the regulator -- will be included in the issuer's regulatory capital base.

The outlook on the subordinated debt rating assigned to Credit Europe Bank Ltd is positive, as Moody's would expect the bank's debt and deposit ratings to move upward in parallel with the ratings of its parent, Credit Europe Bank N.V. (Ba2 deposits, positive; BFSR D/BCA ba2, positive).

WHAT COULD MOVE THE RATINGS UP/DOWN

According to Moody's, Credit Europe Bank Ltd's subordinated debt ratings could be upgraded if the rating of its parent is upgraded or if Credit Europe Bank Ltd improves its funding profile, thus rendering its funding potentially cheaper and less volatile, i.e., enabling it to withstand any potential growing competitive pressures over the longer term.

Moody's says that Credit Europe Bank Ltd's subordinated debt ratings might be adversely affected on evidence of deterioration in its financial metrics triggered either by any deterioration in the operating environment or by intensified competition that leads to a narrowing in net interest margin or higher risk appetite.

PRINCIPAL METHODOLOGIES

The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Moscow, Russia, Credit Europe Bank Ltd reported total unaudited IFRS assets of RUB102.4 billion ($3.1 billion) and shareholders' equity of RUB16.1 billion ($491 million) at end-June 2012. The bank recorded net income of RUB1.3 billion ($39 million) for the first six months of 2012, an increase of 3% compared to the same period of 2011.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

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Semyon IsakovAsst Vice President - Analyst Financial Institutions Group Moody'sInvestors Service Limited, Russian Branch 7th floor, Four Winds Plaza21 1st Tverskaya-Yamskaya St.Moscow 125047 Russia Yves J Lemay MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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