October 23, 2013 / 9:09 AM / 4 years ago

RPT-Fitch assigns Laender 43 'AAA' rating

(Repeat for additional subscribers)

Oct 23 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Laender 43’s EUR1.0bn bonds, due 23 October 2023, a Long-term rating of ‘AAA’. The bonds will be issued by a group of six German federated states (Laender). This is the 43rd joint issue of the German Laender and the 31st to be rated by Fitch.

KEY RATING DRIVERS

The rating reflects the strong support mechanisms that apply to all members of the German Federation, including the six German federated states involved in the joint issue, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment.

Fitch notes that the support mechanisms apply uniformly to all members of the German Federation: the Federal Republic of Germany (AAA/Stable) represented by the federal government (Bund) and the 16 federated states, which include the six states undertaking the issue: Bremen, Hamburg, Mecklenburg-Vorpommern, Rheinland-Pfalz, Saarland and Schleswig-Holstein. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performance.

Each state is liable for its individual share in the issue, the proceeds of which are to be divided between the participating states as follows:

State of Bremen: EUR125m

State of Hamburg: EUR250m

State of Mecklenburg-Vorpommern: EUR125m

State of Rheinland-Pfalz: EUR125m

State of Saarland: EUR125m

State of Schleswig-Holstein: EUR250m

The State of Schleswig-Holstein is the paying agent. The issue’s liquidity is underpinned by the safe cash management system the Laender operate in, which allows overnight cash exchanges between Laender and the Bund when necessary, and recourse to appropriate short-term credit lines. The issue is zero risk-weighted and European Central Bank (ECB) repo-eligible.

The objective of the Laender’s jumbo joint issue is to offer investors a sizeable and liquid bond with portfolio exposure to several issuers.

RATING SENSITIVITIES

A negative rating action would be triggered by a change in the ratings of Germany. Any change in the support scheme would require a review of the rating. The new issue report is available on www.fitchratings.com.

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