Fitch rates Korea Exchange notes BBB

Fitch Ratings said it rated Korea Exchange Bank's (A-/stable) proposed $300 million 10-year subordinated unsecured notes at BBB(EXP).

This will be the bank’s first issue of a Basel III-compliant tier 2 instrument.

Proceeds will be used to strengthen Korea Exchange Bank’s tier 2 capital and for general corporate purposes.

Fitch said the Basel III tier 2 notes are rated two notches below its long-term issuer default rating, which in turn is based on an extremely high probability of support, if required, from the Korean sovereign (AA-/stable) because of the bank's systemic importance.

Korea Exchange Bank’s support-driven issuer default rating, which is higher than its viability rating of bbb+, is used as the anchor rating. This is because the bank would reach a point of non-viability when it is designated as an insolvent financial institution as defined in Article 2 of the Act on the Structural Improvement of the Financial Industry.

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