Fitch Ratings has announced that Suncorp Group Limited’s (SGL) proposed subordinated debt has been assigned a rating of ‘A-’.

Outlining the key rating drivers, Fitch noted that the proposed subordinated securities are rated two notches below SGL’s Issuer Default Rating (IDR), with two notches for ‘Poor’ baseline recoveries and zero for ‘Minimal’ non-performance risk.

The credit rating agency said: “The notching for ‘Poor’ recoveries reflects our assumptions for subordinated debt issued at a holding company under our criteria; should the company be wound up, the issuer’s payment obligations under the securities rank behind all senior creditors but ahead of ordinary shares and additional Tier 1 securities.”

Fitch noted that it does not think APRA would activate the non-viability trigger unless the event was one which was sustained and thus would lead to SGL’s non-viability. As these features were deemed as having ‘Minimal’ non-performance risk, Fitch did not apply additional notching, as per its criteria.

“Fitch expects SGL’s financial leverage ratio (FLR) and fixed-charge coverage ratio to be commensurate with the rating category after the issue of the proposed securities,” the agency reported.“We estimate SGL’s FLR to be below 23% post the debt issue.”

The rating follows the 27% year on year decrease in the group’s profit from ongoing business, for the year ending June 2020. This decrease was largely accredited to higher bank provisions and the investment market impact of the COVID-19 pandemic, as well as one-off items.