S&P Global Ratings has assigned a ‘BBB+’ long-term issue rating to the Singapore dollar-denominated subordinated notes proposed by Prudential Funding (Asia) Plc, a finance company under the Prudential insurance group. These notes are part of Prudential’s extensive $10 billion medium-term note (MTN) programme, with Prudential PLC acting as the guarantor.
The notes, which include loss absorption features, are designed to qualify as regulatory capital under the Hong Kong Insurance Authority’s groupwide supervision framework. This means they can be used by Prudential’s regulated entities to absorb losses whilst maintaining operational stability. Despite their hybrid nature, the notes do not receive equity content recognition due to their tenor being under 10 years, but they are fully considered in the group’s capital adequacy assessment.
The rating is two notches below Prudential PLC’s long-term issuer credit rating, reflecting the notes’ subordination and payment risks associated with mandatory deferral features. The final terms and conditions are still under review, but the notes are expected to support Prudential’s financial leverage, which is projected to remain close to 20% over the next two years.
Prudential maintains a strong regulatory solvency record, with a total groupwide supervision coverage ratio of 203% as of 31 December 2024. The notes can be called in whole between 9.75 and 10 years after issuance, subject to regulatory approval. This issuance underscores Prudential’s strategic approach to managing its capital structure and regulatory requirements.
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