Fitch rates Bank Zenit note B

Fitch Ratings said it assigned an expected B long-term rating with a recovery rating of RR4 to Zenit Capital plc's upcoming loan participation notes, which are to be used for the sole purpose of funding a loan to Russia-based Bank Zenit.

The outlook is stable.

Zenit Capital will only pay noteholders principal and interest received from Bank Zenit, which unconditionally and irrevocably guarantees the timely and full repayment of the notes in the trust deed between the bank and the trustee, Deutsche Trustee Co. Ltd.

The terms and conditions of the notes specify that they will rank at least equally with the claims of other unsecured creditors of Bank Zenit, save those preferred by relevant (bankruptcy, liquidation etc.) laws. Under Russian law, the claims of retail depositors and accountholders rank above those of other senior unsecured creditors. At the end of June, retail deposits and accounts made up 18.8% of Zenit's total liabilities. Furthermore, related-party liabilities constitute a significant part of Bank Zenit's total liabilities (27%). In Fitch's opinion, this could give rise to additional risks for bondholders in a default scenario.

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