OREANDA-NEWS. Fitch Ratings has assigned Nykredit Realkredit AS's (A/Stable/F1) issue of additional Tier 1 notes a final rating of 'BB+'.

The final rating is in line with the expected rating Fitch assigned to the notes on 13 February 2015 (see "Fitch Rates Nykredit Realkredit's CRD IV-Compliant AT1 Capital Instruments 'BB+(EXP)'' at www.fitchratings.com).

KEY RATING DRIVERS
The notes are CRD IV-compliant perpetual non-cumulative resettable additional Tier 1 instruments with a call option after just after five years. The notes are subject to temporary write-down if the common equity Tier 1 (CET1) ratio of Nykredit Realkredit and/or Nykredit Realkredit Group and/or Nykredit Holding Group falls below 7.125%, and any coupon payments may be cancelled at the discretion of the bank.

The rating is five notches below Nykredit Realkredit's 'a' Viability Rating (VR) in accordance with Fitch's criteria for assessing and rating bank subordinated and hybrid securities. The notching reflects the notes' higher expected loss severity relative to senior unsecured creditors (two notches) and higher non-performance risk (three notches) given the fully discretionary coupon payments. Nykredit Realkredit's large capital buffer above the 7.125% CET1 trigger and regulatory minimum capital ratios is sufficient to limit the notching for non-performance risk to three (which could otherwise result in wider notching).

Given the securities are perpetual, their deep subordination, coupon flexibility and going concern mandatory write-down of the instruments, Fitch has assigned 100% equity credit.

RATING SENSITIVITIES
As the notes are notched from Nykredit Realkredit's VR, their rating is primarily sensitive to a change in the VR. The notes' rating is also sensitive to a wider notching if Fitch changes its assessment of the probability of the notes' non-performance risk relative to the risk captured in Nykredit Realkredit's VR.