Sept 13 - Fitch Ratings has affirmed FMS Wertmanagement Anstalt des oeffentlich Rechts' (FMS WM) Long-term Issuer Default Rating (IDR) at 'AAA' with a Stable Outlook, Short-term IDR at 'F1+', Support Rating at '1' and Support Rating Floor at 'AAA'.
RATING DRIVERS AND SENSITIVITIES - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR
The affirmation reflects Fitch's view that there is an extremely high likelihood of support from SoFFin (The Financial Market Stabilisation Fund), and ultimately from Germany ('AAA'/Stable). Germany is directly liable for all SoFFin's obligations. The ratings are therefore aligned with those of Germany. Any changes in Germany's ratings would trigger negative action on FMS WM's ratings.
Fitch's view on support for FMS WM is based on the statutory loss-absorption obligation of the SoFFin as stipulated in the German Financial Market Stabilisation Fund Act and FMS WM's statutes. In 2011, FMS WM posted a net loss of EUR10bn, which was compensated by the SoFFin. Fitch expects FMS WM to be further loss-making due to the low quality of transferred assets. In the agency's view it is uncertain when FMS WM will be profitable.
Furthermore, FMS WM's statutes oblige SoFFin to provide necessary funds in a timely manner to ensure that FMS WM can fulfil its obligations at all times and on first demand. Any requested contribution shall be paid at first demand of FMS WM's management board (within three working days at the latest).
FMS does not have a banking licence and is not subject to any capital requirements, but it can conduct any banking or financial services necessary for the wind-down of its assets. FMS WM entered into service agreements with HRE Group's entities which mature end-September 2013. FMS has founded an own servicing unit to service its assets beyond this date and is currently tendering service contracts for IT and back office services.
FMS WM was established on 8 July 2010 by Germany's Federal Agency for Financial Market Stabilisation, the Finanzmarkstsabilisierungsanstalt (FMSA), which administers the SoFFin and acts on behalf of Germany. The FMSA is also in charge of the supervision of FMS WM.
FMS WM is an independent public law entity (Anstalt des oeffentlichen Rechts), which was established to acquire EUR175.7bn of non-performing and non-strategic assets from Hypo Real Estate Holding AG and its subsidiaries Deutsche Pfandbriefbank AG (PBB, 'A-'/Stable) and DEPFA bank plc (DEPFA, 'BBB+'/Negative), collectively HRE Group, in October 2010 and to subsequently wind-down those assets.
The rating actions are as follows:
Long-term IDR: affirmed at 'AAA'; Outlook Stable
Short-term IDR: affirmed at 'F1+'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'AAA'
Commercial paper: affirmed at 'F1+'
Short-term debt: affirmed at 'F1+'
Senior unsecured: affirmed at 'AAA'/'F1+'