OREANDA-NEWS. March 01, 2016. Fitch Ratings has assigned Vodafone Group plc's (Vodafone) issue of dual tranches of mandatory convertible bonds 50% equity credit (EC).

The mandatory convertible bonds, each in the amount of GBP1.44bn and due respectively in August 2017 and February 2019, meet Fitch's criteria for equity recognition, but the cumulative deferral of interest and cash settlement of deferred interest on conversion constrain EC to 50%.

Fitch has assigned 50% equity credit to the instruments in accordance with Fitch's "Exposure Draft: Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit analysis" (December 2015) because it more accurately reflects our current view. However, under the current criteria "Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit analysis" (November 2014) the instruments would receive zero EC because the cash settlement of deferred interest on conversion of the instrument would be treated as a deferral constraint.

From a forecasting perspective Fitch treats the instruments as 100% equity on conversion. The equity benefit of each tranche is therefore reflected in our central rating case, respectively from August 2017 and February 2019.