Burgan Bank – Initial Rating Assigned to Perpetual Additional Tier 1 Bond (up to KWD154mn)

19 April 2024

Capital Intelligence Ratings (CI Ratings or CI) has assigned a first-time issue rating of ‘BBB-’ to Burgan Bank’s (BB) proposed up to KWD154mn Basel III-compliant Perpetual Additional Tier 1 Bond. The bonds are to be issued by private placement. The Outlook assigned to the rating is Stable.

The issue rating is derived from: (i) BB’s BSR; (ii) the bond’s contractual subordination; (iii) the risk that interest payments might not be made in full and on time given discretionary and/or mandatory coupon restrictions; and (iv) CI’s assumptions regarding the timing of regulatory intervention to write down the bond’s principal if the Bank faces non-viability.

CI’s issue ratings for bank hybrid securities capture impairment risk (which includes the likelihood of losses due to the activation of any loss absorbing mechanisms) and repayment priority. The issue rating on the AT1 bond is set two notches below the Bank’s BSR of ‘bbb+’ and is five…