Fitch Rates Laender 50's EUR1bn Bonds 'AAA(EXP)'
OREANDA-NEWS. Fitch Ratings has assigned Laender 50's EUR1bn fixed-rate bonds (DE000A2AASV2), due 14 April 2023, an expected Long-term 'AAA(EXP)' rating. The bonds will be issued by a group of six German federated states (Laender). This is the 50th joint issue of the German Laender and the 38th to be rated by Fitch. The final rating is contingent upon the receipt of final documents conforming to information already received.
At the same time, Fitch is withdrawing the expected rating it assigned to Laender 50's bonds on 2 February 2016 as this bond issuance will no longer be converted to a final rating and is being replaced by the upcoming bond issue.
KEY RATING DRIVERS
The expected rating reflects the strong support mechanisms that apply to all members of the German Federation, including the six 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 six states undertaking the issue: Bremen, Hamburg, Mecklenburg-Vorpommern, Rheinland-Pfalz, Saarland 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: EUR175m
State of Hamburg: EUR175m
State of Mecklenburg-Vorpommern: EUR125m
State of Rheinland-Pfalz: EUR175m
State of Saarland: EUR175m
State of Schleswig-Holstein: EUR175m
The State of Hamburg 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.