OREANDA-NEWS.  Fitch Ratings has downgraded Westdeutsche Immobilienbank AG's (WestImmo) Long- and Short-term Issuer Default Ratings (IDRs) to 'BBB+'/'F2' from 'A-'/'F1' and removed them from Rating Watch Negative (RWN). The Outlook is Stable.

The rating action follows the completion of WestImmo's acquisition by Aareal Bank AG (Aareal; BBB+/F2), and WestImmo's ratings are now based on institutional support from its new ultimate owner.

KEY RATING DRIVERS

IDRS, SUPPORT RATING AND SENIOR DEBT
WestImmo's IDRs are equalised with those of its new owner, Aareal, reflecting institutional support as the key rating driver. This equalisation is supported by a control and profit-and-loss sharing agreement between the two entities that came into force on 1 June 2015 after the acquisition by Aareal was completed on 31 May 2015. The Stable Outlook reflects that on Aareal's IDR.

Aareal expects a swift integration of WestImmo into the group. Fitch has not assigned a Viability Rating (VR) to WestImmo because we currently do not expect the bank to have a meaningful stand-alone franchise. Should the subsidiary start to generate new business, which it has not done since 2012 due to EU requirements, we may then assign a VR.

GUARANTEED DEBT
WestImmo's guaranteed obligations benefit from the grandfathered statutory guarantor liability (Gewaehrtraeerhaftung) of the former WestLB AG, whose guaranteed obligations benefit from the grandfathered Gewaehrtraegerhaftung of the State of North Rhine-Westphalia (NRW; AAA/Stable). The ratings are hence equalised with NRW's.

RATING SENSITIVITIES

IDRs, SUPPORT RATING AND SENIOR DEBT
As WestImmo's IDRs are equalised Aareal's, they are primarily sensitive to changes in Aareal's ratings, which are driven by the latter's VR. The main sensitivities for Aareal's VR include asset quality deterioration or a significant increase in funding costs. WestImmo's ratings are also sensitive to a change in Fitch's view of the propensity of support from Aareal, which we currently do not expect.

GUARANTEED DEBT
The rating of WestImmo's state-guaranteed/grandfathered senior debt is primarily sensitive to changes NRW's rating.

The rating actions are as follows:

WestImmo:
Long-term IDR: downgraded to 'BBB+' from 'A-'; off RWN; Stable Outlook
Short-term IDR downgraded to 'F2' from 'F1'
Support Rating downgraded to '2' from '1'
Senior debt: downgraded to 'BBB+' from 'A-'
Senior guaranteed debt: affirmed at 'AAA'