Fitch rates Bank of Kaohsiung bond A(twn)

Fitch Ratings said it assigned a national long-term rating of A(twn) to Bank of Kaohsiung Co., Ltd.'s upcoming NT$1.5 billion subordinated unsecured bond.

The Basel III-compliant tier 2 bond (B3T2) has a non-viability trigger provision, which requires the bond to be ranked equally with common shares upon government receivership, regulatory order for resolution or liquidation, Fitch explained.

The bond matures March 15, 2025.

The proceeds will be used for the bank's general corporate purposes, the agency said.

The rating on the bond is two notches lower than the bank's national long-term rating of AA-(twn), reflecting two notches for loss severity and poor recovery prospects for Taiwanese debt of this type, the agency said.

Taiwan's B3T2 bonds adopt a less easily triggered government receivership as the point of non-viability, Fitch said.

The agency said it believes Taiwan's authorities would take receivership over a bank only when the bank's total capital adequacy has fallen to less than 2%, reducing the recovery prospects for B3T2 notes.

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