Tashkent, Uzbekistan (UzDaily.com) -- Fitch Ratings has assigned Joint-Stock Commercial Mortgage Bank Ipoteka-Bank’s (Ipoteka) upcoming issue of Uzbekistan soums-denominated senior unsecured Eurobonds an expected long-term rating of ‘BB-(EXP)’/’RR4’.

The issue will be denominated in Uzbekistan soums, but all settlements will be in U.S. dollars using the exchange rate set by the Central Bank of Uzbekistan at each settlement date. The maturity of the issue will be three years, while the size and the coupon are yet to be determined. Ipoteka plans to use the proceeds to finance its local-currency lending portfolio.

The final rating is contingent upon the receipt of final documents conforming to information already received.

The expected rating is in line with Ipoteka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘BB-’, as all settlements will be in U.S. dollars. The notes will represent direct, unconditional and senior unsecured obligations of the bank, which rank pari passu with its other senior unsecured obligations. 

The ‘BB-’ IDR of Ipoteka is driven by Fitch’s view of a moderate probability of support from the government of Uzbekistan (BB-/Stable). This view considers Uzbekistan’s moderate ability to provide support as well as a high propensity to support Ipoteka based on its majority state ownership, the potentially low cost of support relative to the sovereign’s foreign-currency reserves, and a record of support for the country’s public-sector banks that dominate the banking sector.

The bond draft documentation includes a change-of-status clause, under which bondholders will have an option to redeem the notes at par if Ipoteka’s ratings are downgraded or withdrawn as a result of the state ceasing to control the bank directly and indirectly (i.e. the share of the state declines below 50% +1 share).

Factors that could, individually or collectively, lead to positive rating action/upgrade: Ipoteka’s senior unsecured debt rating may be upgraded if the bank’s IDR is upgraded. Factors that could, individually or collectively, lead to negative rating action/downgrade: Ipoteka’s senior unsecured debt rating may be downgraded if the bank’s IDR is downgraded.