Fitch Assigns HSH Finanzfonds AoeR's EUR750m Bond Final 'AAA'
The assignment of the final rating follows receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The rating reflects the unconditional, irrevocable and unsubordinated guarantee issued by Hamburg and Schleswig-Holstein to secure the bond. Their 'AAA' ratings are based on the strong support mechanisms that apply to all members of the German Federation, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment as well as servicing guarantees if they are called.
The Federal Republic of Germany (AAA/Stable) represented by the federal government (Bund) and the 16 federated states, which includes the two states guaranteeing this issue, are all members of the German Federation benefiting from the support mechanism. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performances.
Hamburg and Schleswig-Holstein founded HSH Finanzfonds AoeR, a public law institution (Anstalt oeffentlichen Rechts; AoeR), for the purpose of providing capital support to HSH Nordbank AG (BBB-/F3) on behalf of the two states.
Based on its legal status, HSH Finanzfonds AoeR benefits from a deficiency guarantee (Gewaehrtragerhaftung) and a maintenance obligation (Anstaltslast) from both states. Furthermore, both states are able to grant explicit and irrevocable, unsubordinated guarantees on first-demand to scheduled bond issues of the institution on a contractual basis with each state guaranteeing 50%. This means that the guaranteed debt of HSH Finanzfonds AoeR ranks equally with all the guarantors' other unsubordinated and unsecured liabilities. Both guarantors are equally and severally, but not jointly, liable. The guarantees are issued for an indefinite period and are governed by the laws of the Federal Republic of Germany.
A downgrade of the sovereign's ratings could lead to a downgrade of the Laender and consequently the bond's rating. Adverse changes to any important institutional features (solidarity principle, equalisation system, liquidity exchange mechanism) would result in a review of the German Laender ratings. Any change to the legal status of the bond issuer or the existing guarantee scheme will also result in a review of the bond's rating.