S&P rates Luzerner Kantonalbank notes BBB

S&P said it assigned a BBB issue rating to the additional tier-1 (AT1) capital notes to be issued by Luzerner Kantonalbank.

The BBB rating reflects an analysis of the proposed instrument and an assessment of the bank's A+ stand-alone credit profile, the agency said.

S&P said it uses the stand-alone credit profile as starting point for assigning the issue rating because it considers the bank's majority shareholder, the Canton of Lucerne, would not support payments on the proposed notes.

The bank's subordinated debt is specifically excluded from the statutory guarantee granted by the Canton of Lucerne, the agency added.

The issue rating stands four notches lower than the stand-alone rating, S&P said. One notch is due to the notes' contractual subordination; two notches for the notes' discretionary coupon payments and regulatory tier-1 capital status; and the fourth notch because the notes contain a contractual write-down clause.

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