Fitch Ratings put Santander UK Plc and its subsidiary Abbey National Treasury Services Plc's ratings — their A long-term issuer default rating, A derivative counterparty rating and A senior unsecured debt long-term rating — on rating watch positive.
Both companies' subordinated debt ratings and Santander UK's viability rating are unaffected by the rating action.
The review on both companies' long-term issuer default rating and senior debt rating comes as a result of parent holding company Santander UK Group Holdings Plc's vast debt issuance activities, including Additional Tier 1 securities, Tier 2 debt and senior debt.
The rating agency believes both companies' external senior creditors will get additional protection when the terms of the senior debt received by Santander UK its parent holding company are "amended so that the debt becomes junior" to its external senior obligations.
The terms will be amended after Santander UK receives clarification from the Bank of England on how to downstream the debt in "an appropriate manner," protecting the banks' external creditors from failure and qualifying it for internal minimum requirement for own funds and eligible liabilities, Fitch said.
Afterward, Fitch expects that both companies' issuer default ratings will be upped a notch to A+ after qualifying junior debt and senior debt is in place.