Fitch Ratings has assigned
The notes are rated three notches below NN's Long-Term Issuer Default Rating (IDR) of 'A+', to reflect their 'poor' recovery assumptions (two notches) and 'moderate' non-performance risk (one notch).
The net proceeds from the issue of the notes will be applied for financing or re-financing of specified green projects or activities in accordance with certain prescribed eligibility criteria as further described in
Key Rating Drivers
The notes have a final maturity date in
We have applied a baseline recovery assumption of 'poor' to the notes, reflecting the level of subordination as well as the fact that NN is the non-operating holding company of the group. The notes will rank pari passu with NN's other dated subordinated Tier 2 notes, junior to any senior indebtedness and senior to all classes of share capital and to any junior subordinated indebtedness. The level of subordination results in the notes being notched down twice from the IDR.
The notes include a mandatory interest deferral that would be triggered if NN is unable to meet its applicable solvency capital requirement, minimum capital requirement or any other capital requirement enforced by the relevant supervisory authority with respect to NN. Fitch regards the mandatory interest deferral as leading to 'moderate' non-performance risk, so it has further notched down once from the IDR.
The notes are expected to qualify as Tier 2 regulatory capital under Solvency II (S2). Consequently, they will receive 100% equity credit in Fitch's Prism Factor-Based Model, due to the application of the agency's regulatory override. However, given that the notes are a dated instrument, they will be treated as 100% debt in Fitch's financial-debt leverage ratio (FLR) calculation.
Fitch views the issue as neutral for NN's capitalisation and FLR as the company has announced it is calling the
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
FLR falls below 15% while operating earnings remain strong, as reflected by a return on assets (ROA) of 1.3% or higher, and the group's S2 ratio remains above 200%
Factors that could, individually or collectively, lead to negative rating action/downgrade:
FLR increases above 30%
The group's S2 ratio falls to below 170%
Operating earnings weaken as reflected by ROA of 1% or below
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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