S&P lowers Eurobank Ergasias

Standard & Poor's said it lowered to D from CC the ratings on Eurobank Ergasias SA's existing subordinated debt securities, along with the rating to C from CC on its series A preferred securities, series B preferred securities and non-cumulative guaranteed non-voting exchangeable preferred securities.

These rating actions do not affect the counterparty credit ratings on Eurobank or any other related issue ratings, S&P said.

The downgrade follows news that the bank will launch of a tender offer on the outstanding amount of its dated subordinated debt and tier 1 preferred securities.

According to the offer, Eurobank is repurchasing for cash the outstanding securities at a purchase price equal to the nominal value, S&P said. At the same time, the proceeds of the repurchase will have to be for the sole purpose of subscribing for new ordinary shares of Eurobank, at an issue price set by the bank, the agency said.

As such, S&P said it understands bondholders accepting the offer will not have the option to retain the proceeds of the repurchase and will be receiving securities that rank junior to the ones they currently hold.

As a result, the downgrade reflects an opinion that the proposed tender offer constitutes a distressed exchange, as it implies that investors will receive less value than the promise of the original securities, the agency said.

This also occurs when the investors receive, in exchange, securities that are ranked more junior without adequate offsetting compensation, S&P said.

The long-term rating on Eurobank is CCC with a negative outlook, the agency added.

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