Deposit ratings downgraded to Baa3/Prime-3 from A3/Prime-2 before withdrawal
Frankfurt am Main, September 20, 2012 -- Moody Investors Service has today taken actions on Portion AG's
ratings, following the break-up of Portigon's commercial
banking activities (formerly known as WestLB). The break-up
became legally effective on 17 September 2012, upon entry of the
transaction into the commercial registers. The actions are as follows:
(1) The ratings of Portigon's senior unsecured bonds --
those transferred to Landesbank Hessen-Thueringen (Helaba,
deposits A2 stable, Prime-1; standalone bank financial
strength rating D+/ standalone credit assessment baa3, stable)
-- were aligned with Helaba's senior unsecured debt
ratings at A2 with a stable outlook, as the debt-assuming
entity
(2) The ratings of Portigon's senior unsecured bonds --
those transferred to Erste Abwicklungsanstalt (EAA, senior unsecured
debt Aa1, negative, Prime-1) -- were
aligned with EAA's senior unsecured debt ratings at Aa1, with
a negative outlook, as the debt-assuming entity
(3) Portigon's long and short-term deposit ratings were downgraded
to Baa3, stable/ Prime-3, from A3, on review
for downgrade/Prime-2, and subsequently withdrawn
(4) One Upper Tier 2 instrument (profit participation certificate,
or Genussschein) issued by Portigon and the trust preferred securities
and silent participations (Stille Einlagen) issued by Hybrid Capital Funding
I Ltd. and Hybrid Capital Funding II Ltd., were downgraded
to C(hyb) from Ca(hyb) and subsequently withdrawn.
Moody's has also withdrawn Portigon's BFSR of E/caa1.
Following the rating actions, Moody's does not maintain any
senior unsecured debt and deposit ratings for Portigon. This reflects
the discontinuation of Portigon's commercial lending activities
and, on 17 September 2012, the transfer of all its commercial
banking assets and liabilities to third parties.
Please click this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_145592
for a list of the re-assigned ratings. This list is an integral
part of this Press Release and identifies the 616 bonds that are transferred
to either EAA or Helaba.
The Aa1, negative/ Prime-1 ratings for obligations that still
qualify for the grandfathering of Gewaehrtraegerhaftung, i.e.
a statutory deficiency guarantee that allows creditors direct recourse
to the guarantors, are unaffected by today's rating actions.
Moody's will therefore maintain these ratings at their current level.
RATINGS RATIONALE
--- ALIGNMENT OF DEBT RATINGS WITH EAA's AND
HELABA's RATINGS
Today's rating alignments of two separate sets of senior unsecured
debt instruments with the senior unsecured debt ratings of Helaba (A2
stable) and EAA (Aa1 negative), respectively, were triggered
by Portigon's break-up, which was legally implemented
on 17 September 2012. This break-up entailed the offload
-- through portfolio transfers to these two entities --
of all outstanding debt, i.e., senior unsecured
bonds and notes, short-term instruments placed in the market,
secured debt instruments (such as covered bonds) and client deposits.
In this transaction, Frankfurt-based Helaba legally assumed
a portfolio with a total business volume of approximately EUR40 billion,
transferred from Portigon (source: Portigon Press Release "Transformation
Implemented Legally and Economically" from 17 September 2012).
EAA, which is the state-supported, dedicated wind-down
vehicle of the former WestLB, assumed all of Portigon's remaining
commercial assets and liabilities. Portigon will continue to exist
as a service provider for the managing and unwinding of asset portfolios.
The servicing operations will have to be unwound completely if the company
cannot be sold by end-2016, as agreed with the European anti-trust
authorities.
Helaba and EAA have assumed the senior unsecured debt instruments and
now represent the sole obligors for the respective instruments.
Therefore, the rating alignment to A2, stable for debt assumed
by Helaba and to Aa1, negative, for debt assumed by EAA reflects
the risk position of the respective bondholders. The two portfolio
transfers affected all senior unsecured instruments previously held by
Portigon and rated by Moody's; no such instruments remain with
Portigon.
--- DOWNGRADE AND WITHDRAWAL OF PORTIGON's
DEPOSIT AND HYBRID DEBT RATINGS
The downgrade of Portigon's deposit ratings to Baa3, stable/
Prime-3, from A3/Prime-2, on review for downgrade
before the withdrawal of these ratings reflects Moody's lower external
support assumptions for Portigon during its restructuring process.
This takes into account that the two North Rhine Westphalian savings bank
associations have ceased to maintain stakes in Portigon, leaving
the burden of any future support -- if required --
to the 100% owner of Portigon, the Federal State of North-Rhine
Westphalia (NRW; Aa1 negative). Previously, the two
savings bank associations jointly owned 51% of the former WestLB
and shared major parts of the burden of repeated support required for
the bank.
At the same time, Moody's says that the Baa3 investment-grade
rating reflects that (1) Portigon has been adequately capitalised,
allowing it to absorb losses that are expected to accumulate in the restructuring
process over the next four years; (2) Portigon has critical operational
responsibilities during its restructuring process; (3) it continues
to be a member of the mutual support scheme of the German Landesbanks;
and (4) a large portion of the costs of the unwinding comprises pension
obligations, which are to be serviced in the interest of its sole
owner, the Federal State of NRW.
The downgrade of one Upper Tier 2 instrument issued by Portigon,
and the trust preferred securities and silent participations issued by
Hybrid Capital Funding I and II, to C(hyb) from Ca(hyb) reflects
the rating agency's expectation that these instruments will (1)
remain with Portigon and not be part of the above-described portfolio
transfers that are beneficial for bondholders in Moody's view;
(2) not pay coupons in the foreseeable future; and (3) incur further
write-downs during the planned restructuring process. The
repayment amount for profit participation certificates currently stands
at 85.1% and for hybrid Tier 1 instruments issued in 2005
at 82.9%.
Moody's has withdrawn Portigon's BFSR at the E level,
and the short and long-term deposit ratings at the Baa3/Prime-3
level as well as the C(hyb) hybrid ratings for its own business reasons.
Please refer to the Moody's Investors Service's Policy for the Withdrawal
of Credit Ratings, available on its website, www.moodys.com.
PRINCIPAL METHODOLOGIES
The principal methodology used in rating Portigon AG and Landesbank Hessen-Thueringen
was Moody's Consolidated Global Bank Rating Methodology published in June
2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
The principal methodology used in rating Erste Abwicklungsanstalt was
Government-Related Issuers: Methodology Update published
in July 2010. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare the ratings are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
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The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst, the person
approving the credit rating (who is the same person identified as the
Managing Director on that page) and the office that has issued the credit
rating.
The person who approved Landesbank Hessen-Thueringen (HELABA) and
Portigon AG credit ratings is Carola Schuler, Managing Director
- Banking JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS:
44 20 7772 5454
The person who approved Erste Abwicklungsanstalt (EAA) credit ratings
is David Rubinoff, Managing Director - Sub-Sovereign
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
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Katharina Barten
VP - Senior Credit Officer
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Portigon's deposit ratings to Baa3 upon break-up and withdraws the ratings
