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Ratings On AMP Ltd. Capital Notes Lowered To 'B+'

SYDNEY (S&P Global Ratings) Nov. 26, 2020--S&P Global Ratings today lowered its long-term issue credit ratings on AMP Ltd.'s (BBB-/Stable/--) AMP Capital Notes and AMP Capital Notes 2 to 'B+' from 'BB-'. At the same time, we removed both issues from CreditWatch, where we had placed them with negative implications on June 12, 2020.

The downgrade reflects our view that hybrid instruments issued out of a nonoperating holding company (NOHC) of a banking group are typically exposed to a greater risk of deferral on payment of coupons compared with the hybrid instruments issued out of an insurance group NOHC. With changes in the AMP group's business mix this year, we now assess it to be mainly a banking group whereas we considered it to be mainly an insurance group in the past.

AMP Capital Notes and AMP Capital Notes 2 are not explicitly recognized as regulatory additional tier-1 capital instruments under banking prudential regulations. Nevertheless, we expect these instruments to behave as if that were the case. AMP Capital Notes and AMP Capital Notes 2 have many features that are similar to instruments that qualify as an Australian bank's regulatory additional tier-1 capital. In addition, AMP Ltd. uses part of the proceeds from AMP Capital Notes and AMP Capital Notes 2 to fund its investment into additional tier-1 capital instruments issued by subsidiary AMP Bank Ltd. on a back-to-back basis. In our view, any coupon deferral, conversion, or write-down on the additional tier-1 capital instruments issued by AMP Bank Ltd. could be mirrored in a similar action on the AMP Capital Notes or AMP Capital Notes 2.

As such, we now rate AMP Capital Notes and AMP Capital Notes 2 four notches below our issuer credit rating on AMP Ltd., reflecting:

  • Two notches for deferability, reflecting the risk of partial or untimely payment (up from one notch);
  • One notch for the notes' subordinated status; and
  • One notch for a nonviability contingent capital feature that would require AMP Ltd. to convert all or a proportion of the notes into ordinary shares or write them off if a nonviability trigger event occurred.

Related Criteria

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst:Nico N DeLange, Sydney + 61 2 9255 9887;
nico.delange@spglobal.com
Secondary Contact:Mark P Symes, Melbourne (61) 3-9631-2051;
mark.symes@spglobal.com

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