Al Ahli Bank of Kuwait – Initial Rating Assigned to Tier 2 Subordinated Bond (up to KWD50mn)

6 November 2023

Capital Intelligence Ratings (CI Ratings or CI) has assigned a first-time issue rating of ‘BBB’ to the Basel III-compliant Tier 2 subordinated unsecured bond (up to KWD50mn) issued by Al Ahli Bank of Kuwait (ABK). The bond issue is on a Private Placement basis. The Outlook for the rating is Stable.

The issue rating is derived from: (i) ABK’s BSR; (ii) the bond’s contractual subordination to senior unsecured obligations; and (iii) CI Ratings’ view that the bond’s loss absorption mechanism is unlikely to be triggered before the Bank is non-viable on a standalone basis. CI’s issue ratings for bank hybrid securities and subordinated debt instruments (especially those with contingent capital features) capture impairment risk (which includes the likelihood of losses due to the activation of any loss absorbing mechanisms), and repayment priority. CI typically uses a bank’s BSR as the starting point for such securities. This is because it is considered…