Fitch Assigns Laender 49 Final 'AAA' Rating
KEY RATING DRIVERS
The final rating reflects the strong support mechanisms that apply to all members of the German Federation, including the seven German federated states involved in the joint issue, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment.
The support mechanism 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 five states undertaking the issue: Bremen, Hamburg, Mecklenburg-Vorpommern, Rheinland-Pfalz and Schleswig-Holstein. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performances.
Each state is liable for its individual share in the issue, the proceeds of which will be divided between the participating states as follows:
State of Bremen: EUR225m
State of Hamburg: EUR200m
State of Mecklenburg-Vorpommern: EUR200m
State of Rheinland-Pfalz: EUR150m
State of Schleswig-Holstein: EUR225m
The State of Mecklenburg-Vorpommern 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 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.
A negative rating action would be triggered by a change in the ratings of Germany. Any change in the support scheme would result in a review of the rating.
The new issue report is available on www.fitchratings.com.