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17 Feb 2009
Frankfurt, February 17, 2009 -- Moody's Investors Service today placed the ratings of all of Commerzbank
Group's Tier 1 hybrid instruments and upper Tier 2 instruments on
review for possible downgrade. The rating action covers instruments
issued by Commerzbank AG, its vehicles Capital Funding Trust I,
II and III, Dresdner Bank AG as well as its vehicles Dresdner Funding
Trust I to IV, and HT1 Funding Trust GmbH, Eurohypo AG and
its vehicles Capital Funding Trust I and II, and upper Tier 2 instruments
issued by the former Hypothekenbank in Essen, now part of Eurohypo
AG. All other existing ratings of these banks are not affected
by today's rating action.
According to Moody's, the review for downgrade is warranted
given the heightened risk of trigger breaches for either coupon deferrals
or, where applicable, the threat of a principal write-down
-- or both -- following the financial year
2008 for which several of the operating entities concerned are expected
to report major losses. The substantially weakened outlook on profitability
for the next two years is also exerting downward pressure on these ratings.
Moody's recognises not only the Commerzbank Group's strong
commitment to accommodate relevant deeply subordinated bond and hybrid
investors with ongoing payments but also the reserves available at the
various operating entities, which may serve as a cushion to effectively
avoid any coupon deferrals or write-downs. However,
the expected progressive depletion of such reserves against the weak outlook
for profitability for the next two years may justify downgrades of various
degrees for individual instruments. For instruments issued by Commerzbank
AG and its vehicles Capital Funding Trust I, II and III, Moody's
assessment will take into account the higher burden of coupon payments
on the new Tier 1 hybrid capital of EUR16.4 billion made available
by the German Financial Market Stabilisation Fund (SoFFin), which
will rank pari passu with other hybrid coupons to be paid by Commerzbank
In addition to the earnings prospects for the relevant entities of Commerzbank
Group involved, Moody's review will also focus on the terms
and conditions, in particular the terms for trigger breaches,
the individual public and non-public reserves available at entity
level under German GAAP which may shield against trigger breaches,
third-party guarantees as far as available, and the subordination
of the respective instruments.
The latest rating action on Commerzbank and Dresdner Bank was on 13 January
2009, when Moody's affirmed the Aa3 debt and deposit ratings
for both banks with a stable outlook, and changed the outlook on
Commerzbank's C BFSR to negative from stable. At the same
time, Moody's downgraded the BFSR of Dresdner Bank to C-
from C and maintained the negative outlook on this rating.
The most recent rating action on Eurohypo was on 22 January 2009,
when Moody's confirmed Eurohypo AG's A1 long-term debt and
deposit ratings and A2 subordinated debt ratings, concluding the
review for possible upgrade initiated on 19 August 2008. The A3
ratings of the silent participations of Eurohypo AG had also been placed
on review for upgrade in August 2008, but these ratings were not
addressed in Moody's 22 January 2009 press release. For the
same reasons as outlined in our press release of 22 January, the
A3 ratings of the silent participations of Eurohypo AG should have been
confirmed at the same time, prior to the current review for downgrade.
The principal methodologies used in rating the entities of Commerzbank
Group are "Bank Financial Strength Ratings: Global Methodology"
and "Guidelines for Rating Bank Junior Securities", which can be
found on www.moodys.com in the Credit Policy & Methodologies
directory, in the Ratings Methodologies subdirectory. Other
methodologies and factors that may have been considered in the process
of rating the issuers can also be found in the Credit Policy & Methodologies
Domiciled in Frankfurt, Germany, Dresdner Bank reported total
assets of EUR482 billion as of 30 September 2008 and a loss before tax
of EUR1.9 billion for the first nine months of the year.
Domiciled in Frankfurt, Germany, Commerzbank reported total
assets of EUR596 billion as at 30 September 2008 and a pre-tax
profit of EUR419 million for the first nine months of the year.
Vice President - Senior Analyst
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews all Commerzbank Group hybrid ratings for possible downgrade
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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