Ratings upgrade looks likely for Standard Life Bank
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Standard & Poor’s Ratings Services has placed its ‘A-/A-2’ long- and short-term counterparty credit ratings on Standard Life Bank on CreditWatch with positive implications.
This follows yesterday’s announcement that Barclays Bank has agreed to acquire Standard Life Bank. At the same time, it has placed its ratings on senior unsecured and subordinated debt issued or guaranteed by Standard Life Bank on CreditWatch with positive implications.
The ratings on Barclays are unaffected.
Nigel Greenwood, credit analyst at S&P’s says: “Barclays and Standard Life announced yesterday that Barclays has agreed to acquire SLB for at least £226 million in cash.
The consideration is subject to adjustment based on SLB’s tangible net assets at the completion date, which is expected to be in January 2010.”
S&P says its CreditWatch placement principally reflects its understanding that Standard Life Bank’s assets and liabilities will transfer to Barclays during 2010 under Part VII of the U.K.
In the context of its rating view of Barclays, this transaction has minimal impact due to its relatively small size. Barclays’ UK residential mortgage and retail deposit balances will increase by about 10% and 6%, respectively, and it will remain the fourth-largest UK mortgage lender. Since the acquisition is priced below Standard Life Bank tangible net assets, it does not expect it to have a material impact on Barclays’ capital position.
Greenwood adds: “The CreditWatch placement reflects our expectation that the acquisition and the subsequent merger of SLB into Barclays are likely to proceed. We intend to resolve the CreditWatch placement once the merger has been completed.
“The ratings on SLB’s senior unsecured and subordinated debt would then be equalized with the ratings on the equivalent instruments issued by Barclays, since Barclays would become the obligor for SLB’s outstanding debt. Should the acquisition and/or merger not take place, we would reassess the counterparty credit and debt ratings on SLB in light of its circumstances at that time.”
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