S&P scrutinizes IDBI's medium-term notes

Standard & Poor's assigned a 'BBB-' rating on the senior unsecured notes of IDBI Bank's proposed debt issues under the US$1.5 billion medium-term notes program.

It also assigned a 'BB+' rating on the lower Tier 2 subordinate and 'BB' rating on the upper Tier 2 subordinated and hybrid Tier 1 notes.

The lower Tier 2 subordinated notes will have a minimum maturity of five years, or 63 months if issued between 1 January and March 31 of any year, and the upper Tier 2 subordinated notes will have a minimum maturity of 15 years. The hybrid Tier 1 notes are perpetual and have no maturity. However, a call option on the upper Tier 2 and hybrid Tier 1 is permissible, with RBI's prior approval, after the instrument has run for at least 10 years. Proceeds from these issues will be used to fund IDBI's foreign offices as well as for general corporate purposes.

The senior notes will constitute direct, unconditional, unsecured and unsubordinated obligations of the bank, and shall at all times rank pari passu with all other unsecured obligations. The subordinated notes, lower Tier 2 and upper Tier 2, will constitute the unsecured and subordinated obligations. They will be subordinate to the claims of the senior debt holders. Upper Tier 2 notes will be further subordinated to lower Tier 2 notes of the bank and rank pari passu with all subordinated debt in their respective class. The payment obligation on the hybrid Tier 1 notes will rank junior to the claims of holders of senior and subordinated debt but senior to the claims of holders of preference and equity shares.