MOODY'S ASSIGNS RATINGS TO COMMERZBANK EUROPE (IRELAND): LONG TERM DEPOSITS AND COUNTERPARTY RATING AT Aa3; SHORT-TERM DEPOSITS AT PRIME-1; ALSO PRIME-1 TO COMMERZBANK EUROPE FINANCE (IRELAND) PLC FOR GUARANTEED COMMERCIAL PAPER
New York, 01-15-97 -- Moody's assigned Aa3 long-term deposits and counterparty ratings, Prime-1 short-term deposit rating, and D+ financial strength rating to Commerzbank Europe (Ireland). It also assigned a Prime-1 rating to Commerzbank Europe Finance (Ireland) plc. for its guaranteed commercial paper.
The rating agency said that the ratings were based on the support of the Frankfurt-based parent bank, Commerzbank AG (rated Aa2/Prime-1). The support takes two forms: 1) A "Patronatserkl„rung" or Letter of Comfort from Commerzbank AG as stated in its annual report ensures that the subsidiary is - except with regard to political risks - able to meet its contractual liabilities, and 2) the fact that Commerzbank Europe (Ireland) is an unlimited liability company, which means that it is incorporated as a company whose shareholders have, in the event of the insolvent liquidation of the company, unlimited liability for the debt of the company. Moody's said that it considers these support mechanisms, which are not tantamount to actual guarantees, to be strong enough to result in a rating very close to (but not the same as) the parent company.
Commerzbank Europe (Ireland) was established primarily to conduct lending business with highly rated clients including structured transactions such as asset-backed securities and asset swaps. Commerzbank Europe (Ireland) holds a tax certificate issued by the minister of Finance of Ireland which entitles it to operater from Dublin's International Financial Sevices Centre (IFSC). It is currently 73.3% owned by Commerzbank, with the other shareholders' liabilities limited to the amount of their capital investment. Commerzbank will at all times hold at least 20% of the capital in order to fully consolidate the company into its own accounts and will retain control of the board regardless of its ownership level.
Commerzbank Europe (Ireland) completed its first full year of operation in 1995 and has experienced rapid growth. Total assets at year-end 1995 were DM 1.3 billion (US$ 812 million) and had reached DM 3.6 billion (US$ 2.2 billion) by November, 1996. Capitalization is currently very high but the company's growth over time is expected to reduce the tier 1 ratio. Risk appetite for the bank is low. The financial strength rating of D+ reflects the more limited size and franchise of the business.
Commerzbank Europe Finance (Ireland) plc. will issue commercial paper under the unconditional and irrevocable guarantee of Commerzbank Europe (Ireland). Back-up sources of liquidity for the US $ 1 billion commercial paper program include the highly-rated investment portfolio and both group and non-group interbank lines. The following ratings were assigned:
Commerzbank Europe (Ireland) --long-term deposit and counterparty rating at Aa3; short-term deposit rating at Prime-1; bank financial strength rating at D+
Commerzbank Europe Finance (Ireland) plc.--rating of the company for commercial paper (guaranteed by Commerzbank Europe (Ireland)) at Prime-1.
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