MOODY'S UPGRADES RATINGS OF BANKERS TRUST CORPORATION (SENIOR TO A1) AND CONFIRMS DEBT RATINGS OF BANKERS TRUST COMPANY (DEPOSITS AT A1)
Moody's Investors Service upgraded the long-term debt ratings of Bankers Trust Corporation (BT) (senior to A1), based on the pending combination between BT and Deutsche Bank. The long-term debt ratings of BT Alex. Brown were also upgraded (senior to A1). Moody's confirmed the long-term debt ratings of Bankers Trust Company and Bankers Trust International (senior at A1) and lowered their bank financial strength ratings to C. All short-term ratings for the various BT entities were confirmed.
Moody's also adjusted Deutsche Bank's ratings and commented on those rating actions in a separate press release.
The rating actions for the Bankers Trust entities reflect their strategic importance within the Deutsche Bank group, their positions in the group's legal structure, and the overall strength of the Deutsche Bank group, Moody's said. Moody's expects that the Bankers Trust companies benefit from strong support from Deutsche Bank, even though Deutsche Bank will not guarantee or assume their liabilities.
Both BT and Deutsche Bank should benefit from the combination, according to Moody's. BT will gain access to Deutsche Bank's stable funding sources, strong financial resources, and large client base. BT has solid market positions in leveraged lending and high-yield bond underwriting in the United States, as well as a substantial equity underwriting capability. These areas of expertise could provide a sound platform for Deutsche Bank to expand its investment banking activities in the U.S and Europe, Moody's said.
However, the rating agency added, the combined entity will face significant challenges in integrating two institutions with very different cultures. The group will compete with other global financial institutions that are deeply entrenched in both the U.S. and Europe and have larger market shares in important business lines.
Moody's noted that, pursuant to the combination, Bankers Trust Company will focus primarily on transaction processing services, such as cash management and custody, and private banking. BT's investment banking and trading activities, including its emerging markets portfolios, will be combined with those of various Deutsche Bank units in due course. Moody's anticipates that Bankers Trust Company's revenues will be more stable in the future, but the bank will have a narrower franchise and a smaller earnings base. The bank financial strength rating was therefore lowered.
The ratings of Bankers Trust Australia remain on review, direction uncertain. Deutsche Bank and Bankers Trust have previously announced their intention to sell that unit to a third party.
The following ratings were affected:
Bankers Trust Corporation - senior long-term debt and issuer ratings upgraded to A1 from A2; subordinated debt to A2 from A3; junior subordinated to (P) A2 from (P)A3; preferred stock to "a1" from "a2". The Prime-1 commercial paper and short-term obligations ratings were confirmed.
Bankers Trust Company - senior long-term debt, deposits, and issuer ratings confirmed at A1 and subordinated debt at A2. The short-term deposit rating was confirmed at Prime-1. The company's bank financial strength rating was lowered to C from C+.
BT Alex. Brown Incorporated - senior debt upgraded to A1 from A2 and subordinated debt to A2 from A3. The Prime-1 short-term and commercial paper ratings were confirmed.
Bankers Trust International Plc. -senior long-term debt, deposits and issuer ratings confirmed at A1 and subordinated debt at A2. The Prime-1 short term rating was confirmed. The bank financial strength rating was lowered to C from C+.
Bankers Trust (Delaware) - long-term deposit, other senior obligations, and issuer ratings confirmed at A1. The short-term debt and deposit ratings of Prime-1 were confirmed. The company's bank financial strength rating was lowered to C from C+.
Bankers Trust Company of California, N.A. - long-term deposits, other senior obligations, and issuer ratings confirmed at A1. The Prime-1 short term deposit rating was confirmed at Prime-1. The bank financial strength rating was lowered to C from C+;
Japan Bankers Trust Co., Ltd. - long-term deposit and issuer ratings confirmed at A2. The bank financial strength rating was lowered to D+. The short-term bank deposit rating was confirmed at Prime-1;
BT Capital Trust B - preferred stock upgraded to "a1" from "a2".
BT Institutional Capital Trust A - preferred stock upgraded to "a1" from "a2".
BT Institutional Capital Trust B - preferred stock upgraded to "a1" from "a2".
BT Preferred Capital Trust I - preferred stock was upgraded to "a1" from "a2".
BT Preferred Capital Trust II - preferred stock upgraded to "a1" from "a2".
BT Preferred Capital Trust III - preferred stock upgraded to (P)"a1" from (P)"a2".
BT Preferred Capital Trust IV - preferred stock upgraded to (P)"a1" from(P)"a2".
BTC Capital Trust I - preferred stock confirmed at "a2".
The following ratings remain on review with direction uncertain:
Bankers Trust Australia Ltd. - A1 deposit rating; A1 issuer rating; A2 subordinated debt rating; C+ bank financial strength rating; Prime-1 rating for short-term deposits.
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