Tokyo, Sept. 17, 2009 – Standard & Poor’s Ratings Services today assigned its ‘BBB’ long-term issue rating on the noncumulative preferred securities issued by Mizuho Capital Investment (JPY) 5 Ltd., a wholly owned overseas subsidiary of Mizuho Financial Group Inc. (Mizuho FG; A/Stable/–) that specializes in financing.

The rating on the preferred securities, which is three notches lower than the long-term counterparty credit rating on Mizuho FG, reflects our stand-alone assessment on the company, which excludes government support in the event of an emergency, the securities’ subordinated status relative to the group’s senior debt in the case of liquidation, and the deferability of dividend payments at the discretion of the issuer or on a mandatory basis.

Mizuho FG’s capitalization could be eroded due to the weak economy and/or falling stock prices, as its level and quality are slightly weaker than those of the other Japanese mega-banks. On the other hand, Mizuho FG’s regulatory capital adequacy ratio was 11.5% as of June 30, 2009, exceeding the minimum standard of 8%. Furthermore, Mizuho FG’s distributable profit was \1,667 billion as of March 31, 2009, which is sufficient to cover interest and dividend payments. Standard & Poor’s believes that these factors mitigate the risk of deferred dividend payments.

The preferred securities to be issued by Mizuho FG should receive an “intermediate-strong” equity content designation, which places the securities at the higher level of the “intermediate” category of Standard & Poor’s hybrid capital assessment methodology. This assessment is based on the following: The maturity is perpetual; dividend payments would be deferrable if the group is unable to meet regulatory capital requirements; the securities are subordinated to senior debt; and there are no step-up features for the dividend payment ratio. Accordingly, an amount up to 33% of the group’s adjusted common equity (ACE) could be included in the calculation of its adjusted total equity (ATE). However, Mizuho FG has already issued preferred shares and securities that have exceeded this upper limit. Although a capital increase through the issuance of preferred securities is generally a positive rating factor, it has no impact on the group’s ATE ratio, which is a key factor in Standard & Poor’s credit analysis.

Re-disseminated by The Asian Banker