Fitch Rates Saarland's EUR250m Bond 'AAA(EXP)'
OREANDA-NEWS. Fitch Ratings has assigned the State of Saarland's scheduled EUR250m 0.5% fixed-rate bonds DE000A11P8T2, due 27 May 2026, an expected Long-term rating of 'AAA(EXP)'. The senior unsecured bond ranks pari passu with all of Saarland's other outstanding debt.
The final rating is contingent upon the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The rating reflects the strong support mechanisms that apply to all members of the German Federation, including the State of Saarland, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment.
The support mechanism applies 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 State of Saarland undertaking this issue. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performances.
The new EUR250m 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 repo-eligible.
Saarland is located in western Germany bordering France and Luxembourg internationally. At end-2015, the population was about 989,900. Its capital is the City of Saarbruecken. Its GDP of EUR35bn accounted for almost 1.2% of national GDP in 2015. Its GDP per capita of EUR35,409 is slightly below Germany's average of EUR37,099. The unemployment rate was 7.4% in April 2016, above that of Germany (6.3%).
A negative rating action would be triggered by a change in the ratings of Germany. A change in the support scheme would result in a review of the rating.