TEXT-Fitch revises Stichting Waarborgfonds Eigen Woningen's outlook to negative; affirms at 'AAA'

Fri Feb 8, 2013 4:30am EST

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(The following statement was released by the rating agency)

Feb 08 - Fitch Ratings has revised Stichting Waarborgfonds Eigen Woningen's (WEW)'s Outlook to Negative from Stable. At the same time the agency has affirmed the Long-term foreign and local currency ratings at 'AAA' and a Short-term Local currency rating at 'F1+'.

RATING RATIONALE

The Outlook revision reflects the revision of Netherlands' ('AAA'/Negative/'F1+') Outlook. The revision also reflects the application of the "Rating of Public Sector Entities - Outside the United States" methodology according to which dependent entities cannot be rated above the owner (sponsor) and non-dependent entities cannot be rated above the sponsor unless their stand-alone rating is stronger than the sponsor.

WEW's ratings are credit linked to its sponsor, the sovereign, as WEW receives support in the way of a back stop liquidity agreement by the state. WEW is a foundation and receives oversight by the state. WEW's board of supervisors is formed of five members. Of these, three are appointed by members of the government; two by the Ministry of Internal Affairs and Kingdom Relations and one by the Ministry of Finance. The availability of housing is one of the Dutch government's strategic policies and as such it has supported WEW through approving policies to alleviate the effects of the economic crisis. This has mainly been through promoting access to homeownership for lower and middle income households. Approximately 30% of total mortgages in the Dutch market carry a WEW guarantee.

One of the reasons the sovereign's Outlook was revised to Negative is due to real estate prices declining at a more rapid pace than forecast and the housing correction being sharper than initially expected. Fitch expects the current trend of 5%-7% annual correction to continue until 2014.

RATING SENSITIVITIES

A downgrade could result from a downgrade of the Netherlands' sovereign rating. A downgrade could also result from an adverse change in WEW's legal status and support from the state.

Additionally, an acceleration of the pace of the housing market decline may have a negative impact on the overall Dutch economic activity, and on the Netherlands's public finances. This may finally hamper the sponsor's ability to support its dependant entities and could lead to a review of the notching difference between the sovereign and WEW.

KEY ASSUMPTIONS

Fitch assumes that capital funds will be sufficient to cover rescission payments and the liquidity facility would cover this in case of a shortfall.

Fitch also expects there will no change to the financial support offered by the government consisting of a contractual support system through a backstop agreement, where the state is responsible for providing interest free loans in case of need.

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