OREANDA-NEWS. Moody's Investors Service assigned a Baa2(hyb) rating to the €1.25 billion senior contingent notes (SCN) issued in March 2010. The ten-year securities maturing in 2020 rank pari passu with senior debt and therefore senior to Rabobank’s subordinated debt, deeply subordinated debt and to Rabobank Certificates qualifying for common equity tier 1 capital (CET1).

As for senior debt, the coupons of the SCN may not be cancelled at issuer’s discretion or mandatorily upon a trigger breach. However, the principal of the securities would be permanently written down by 75% if Rabobank Group's Equity Capital Ratio (ECR) fell below 7%, this ratio being defined as the sum of retained earnings and Rabobank Certificates divided by risk-weighted assets.

Moody's expects that this rating will likely transition upwards over the next few years towards A3(hyb), in line with Rabobank's current Tier 2 debt rating. This is because the ECR will improve more quickly than the CET1 ratio because it benefits from earnings retention without suffering from increasing regulatory deductions as Basel 3 transitional provisions for regulatory capital deductions are removed.