Just Group Tier 2 notes rated BBB by Fitch

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Just Group Tier 2 notes rated BBB

Highlights

Fitch assigned a 'BBB' rating to Just Group plc's GBP250 million Tier 2 notes, three notches below its 'A' Long-Term Issuer Default Rating.
The notes have an 11.25-year maturity, a first call date in September 2032, fixed coupon, mandatory interest deferral, and rank junior to senior notes.
Fitch views the issuance as broadly neutral for capital and leverage, expecting most proceeds to refinance existing Tier 2 notes and extend maturity.

Rating rationale and note structure

As reported by Fitch Ratings, Just Group plc's GBP250 million subordinated Tier 2 notes have been assigned a 'BBB' rating, three notches below the group's 'A' Long-Term Issuer Default Rating. The gap comprises two notches for 'poor' recovery prospects and one notch for 'moderate' non-performance risk under Fitch's criteria.

The notes have a maturity of 11.25 years, a first call date in September 2032 and a fixed coupon. They rank junior to senior notes and equally with senior subordinated securities, a level of subordination that supports Fitch's 'poor' baseline recovery assumption because Just is the holding company of its insurance operations.

The instrument also includes a mandatory interest deferral feature, triggered if the group is unable to meet the applicable solvency capital requirement. Fitch says this results in 'moderate' non-performance risk under its methodology.

Capital and refinancing impact

The notes qualify as Tier 2 regulatory capital under Solvency II and are treated as 100% capital in Fitch's Prism Global Model. Because the instrument is dated, however, Fitch treats it as 100% debt in its financial leverage ratio calculation.

Fitch views the proposed issue as broadly neutral for Just's capital position and leverage because it expects a large part of the proceeds to be used to refinance existing Tier 2 subordinated notes. The agency says fixed-charge coverage should remain strong and in line with current ratings, while the issuance extends the company's maturity profile and highlights financial flexibility.

The rating action remains linked to Just's issuer rating. The notes will be downgraded if the group's IDR is downgraded, and upgraded if the IDR is upgraded.

Our earlier coverage highlighted the UK Financial Conduct Authority’s plan to tighten resilience standards for money market funds by requiring higher levels of liquid assets. The proposal sets supervisory expectations of 40% weekly liquid assets for stable NAV funds and 20% for variable NAV funds, signaling a more prescriptive approach to liquidity risk management. This provides useful context for how UK financial firms and markets are increasingly being shaped by stricter regulatory requirements and safeguards.

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