S&P Revises Counterparty Rating on National Bank of Greece to 'SD' Following Completion of Capital Raise

Standard & Poor's Ratings Services said that it revised its counterparty credit rating on National Bank of Greece to 'SD' (selective default) from 'D'. We also raised our issue rating on the senior unsecured debt to 'CCC+', our issue rating on the subordinated debt to 'CC', and the short-term rating on the bank's €5 billion EMTN program to 'C', all from 'D'.

The rating action follows NBG's completion of its €4.48 billion capital raising plan. The bank has covered €1.8 billion through private funds, about €1.5 billion by completing a capital increase and a distressed exchange on its senior unsecured, subordinated, and preferred securities. It also raised about €302.4 million through mandatory conversion of senior debt, subordinated instruments, and preference shares not voluntarily exchanged into equity. This measure of burden sharing follows the bank's request for state aid to cover the remaining part of its capital shortfall.

In addition, the Hellenic Financial Stability Fund (HFSF) will provide the residual €2.7 billion needed to cover the entire shortfall that emerged from the European Central Bank's Single Supervisory Mechanism (SSM), of which 25% will come through equity and 75% by acquiring contingent convertible bonds to be issued by NBG.

Our 'SD' rating on NBG reflects our view that the bank is still unable to completely fulfil its deposit obligations in a timely manner, due to the capital controls being imposed in Greece.

We raised our issue rating on NBG's senior unsecured bonds to 'CCC+' from 'D', reflecting our view that the bank is currently vulnerable and dependent on favorable business, financial, and economic conditions to meet its financial commitments. The rating reflects the bank's fragile financial profile in the context of a weak economic and operating environment in Greece. We also believe the EU authorities will continue to provide liquidity facilities to the Greek banks.

We raised our issue rating on the subordinated debt to 'CC' from 'D'. We rate NBG's subordinated debt three notches below the senior notes to indicate their degree of subordination and that these instruments carry higher risks that the senior obligations.

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