14th Mar 2014 07:26
LONDON (Alliance News) - Moody's Investors Service late Thursday downgraded Royal Bank of Scotland Group PLC's supported long-term ratings to Baa2 from Baa1, one month after placing the bailed-out bank on review.
RBS's "ambitious and comprehensive multi-year restructuring" played its part in the decision, with the ratings agency stating that a standalone credit assessment of Ba1 better reflects the risk the restructuring poses to bondholders.
That said, Moody's said that if the restructuring goes according to plan it will be positive to bondholders in the medium to long-term, because the bank will be predominantly UK-focused and less risky.
"Over a longer-term horizon, RBS's restructuring plan should be beneficial for creditors if executed according to plan. However, the plan is large and complex, carrying significant execution risk in the short to medium term, happening at a time when the bank has limited financial flexibility to manage unforeseen events, which could arise either from the plan or from other sources, such as further litigation or conduct costs", Andrea Usai, Moody's Vice President, Senior Credit Officer, said in a statement.
At the end of February, RBS unveiled a restructuring plan to make significant cost-savings and return to health after six years of making losses exceeding GBP45.0 billion - the amount the UK government pumped into the bank in order to save it after the financial crisis.
Moody's said it considers that "significant headwinds could materialise in the short to medium term". These would challenge the execution of the overall complex group restructuring, the ratings agency said.
"Upgrades of RBS's ratings are unlikely in the short term, given the current negative outlook," Moody's said. "
By Samuel Agini; [email protected]; @samuelagini
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