S&P rates KFB Cayman notes

Standard & Poor's said it assigned its BB- rating to the senior secured floating-rate notes to be issued by KFB Cayman Holdings Co. The notes are secured by a 50.1% share of the issuer, KFB Cayman, and partly linked to the credit quality of Korea First Bank (BBB-/stable/A-3).

The cash flow to service the interest and principal payments of the proposed notes will be solely derived from the dividends paid by Korea First Bank or the proceeds from KFB Cayman's sale of its indirect 48.56% ownership on Korea First Bank through an intermediary investment vehicle, KFB Newbridge Holdings (Private) Ltd.

S&P said the rating on the proposed notes reflects the uncertainty surrounding the issuer's ability to refinance the notes at maturity, the distributable reserve test for Korea First Bank's dividends payments, and the note holders' structurally subordinated claim on Korea First Bank's cash flows to other Korea First Bank creditors.

The payments on the proposed notes are exposed to the risk of currency mismatch because dividends from Korea First Bank are paid in Korean won while the payments on the notes will be made in U.S. dollars.

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