OREANDA-NEWS. Fitch Ratings has assigned Prudential Plc's (Prudential) USD1bn issue of subordinated notes a rating of 'BBB+'. The notes are rated three notches below Prudential's Long-Term Issuer Default Rating (IDR) of 'A+', which has a Stable Outlook, to reflect their subordination and loss absorption features, in line with Fitch's notching criteria.

KEY RATING DRIVERS

The Tier 2 subordinated notes carry a coupon of 5.25% and are perpetual securities, callable after a period of five years. The notes include a mandatory interest deferral feature that would be triggered if the company is unable to meet the applicable Solvency Capital Requirement (or Minimum Capital Requirement), as defined in the Solvency II directive.

We have applied to the Tier 2 notes a baseline recovery assumption of 'poor', reflecting the level of subordination, and a non-performance risk assessment of 'moderate', reflecting the mandatory interest deferral feature. As a result, the rating is notched down three times from the IDR; two notches for recovery prospects and one notch for non-performance risk.

According to Fitch's methodology, this subordinated bond is classified as 100% capital due to regulatory override within Fitch's risk-based capital assessment and is classified as 100% debt for the agency's financial leverage calculations. The resulting changes in Prudential's financial leverage and fixed charge coverage are not expected to be material.