TEXT - S&P comments on Hypothekenbank Frankfurt AG

Fri Nov 16, 2012 10:26am EST

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(The following statement was released by the rating agency)

-- We consider that the nondeferrable senior subordinated debt of Hypothekenbank Frankfurt AG has the same likelihood of receiving support from the parent Commerzbank AG in case of need as Commerzbank's own nondeferrable senior subordinated debt.

-- We are therefore affirming the 'BBB' rating on Hypothekenbank Frankfurt's nondeferrable senior subordinated debt, and removing it from CreditWatch with negative implications. Nov 16 - Standard & Poor's Ratings Services said today that it had affirmed the 'BBB' rating on the nondeferrable senior subordinated debt of Hypothekenbank Frankfurt AG (formerly Eurohypo AG) and removed it from CreditWatch with negative implications. No other ratings on Hypothekenbank Frankfurt AG (A-/Negative/A-2) are affected by this rating action. The rating had been on CreditWatch negative reflecting our uncertainty about future support for Hypothekenbank Frankfurt's nondeferrable senior subordinated debt from the bank's parent Commerzbank AG (A/Negative/A-1). We have subsequently examined the latest information available regarding the details of the run-down process of Hypothekenbank Frankfurt and have had discussions with management on Hypothekenbank Frankfurt's restructuring progress. As a result, we have concluded that Hypothekenbank Frankfurt's nondeferrable senior subordinated debt has the same likelihood of receiving support from the parent Commerzbank in case of need as Commerzbank's own nondeferrable senior subordinated debt. The rating on this debt is thus on the same level as the ratings on Commerzbank's nondeferrable senior subordinated debt, that is, one notch below Commerzbank's stand-alone credit profile (SACP). We don't factor in any uplift for potential government support in our issue ratings on nondeferrable subordinated instruments. The issue ratings solely reflect Commerzbank's SACP. An SACP reflects our view of a bank's credit risk without extraordinary support from the government. We believe that by notching from the SACP, we better capture the greater likelihood that government intervention will not be available to support subordinated debt issues. (Caryn Trokie, New York Ratings Unit)

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