RPT-Fitch rates Westdeutsche ImmobilienBank AG 'A-'; outlook stable
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Oct 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Germany-based Westdeutsche ImmobilienBank AG (WestImmo) a Long-term Issuer Default Rating (IDR) of 'A-', a Short-term IDR of 'F1', and a Support Rating (SR) of '1'. The Outlook on the Long-term IDR is Stable.
WestImmo's Long-Term and Short-term IDR and Support Rating are driven by the extremely high likelihood that support from its owner would be forthcoming, ifneeded. This view is supported by Fitch's analysis of WestImmo's sole ultimate owner, Erste Abwicklungsanstalt (EAA, AAA/Stable). EAA was formed to take on the underperforming assets of the former WestLB. EAA's strong ability to provide support to WestImmo is underpinned by North Rhine Westphalia's (AAA/Stable) 48.2% ownership of EAA, and by EAA's explicit support structure, as set out in its statutes.
Fitch has not assigned a Viability Rating (VR) to WestImmo because WestImmo is not conducting new business, it has stopped being active in the money market, and the prospect of its wind-down is destroying its franchise value. We believe that a sale of WestImmo to a committed strategic investor could help to reactivate WestImmo's business because its obligation not to conduct new business will cease with an ownership change. However, we expect that WestImmo would need implicit external support to ensure its long-term viability.
RATING DRIVERS AND SENSITIVITIES - IDRs and SR
We believe EAA's propensity to support WestImmo is extremely high because of its strong obligation resulting from its role as the owner and which is documented by a letter of comfort (LOC). The support propensity is also underpinned by a profit-and-loss sharing agreement between EAA and WestImmo.
WestImmo's IDR is notched six levels down from EAA's 'AAA' rating to reflect the risks that WestImmo could be sold to an investor with a weaker credit profile and/or with less commitment to WestImmo than EAA. We believe that any potential investor would be a strategic investor which has to be approved by the German regulator, enable WestImmo to become a member of the German Deposit Protection Scheme and release EAA from any potential contingent liabilities tied to its LOC.
The IDR also takes into account the challenges EAA will face to run down a Pfandbriefbank in view of the complexities of maintaining a robust operational platform and the requirements of the Pfandbrief Act. The timing and details of the liquidation process of WestImmo at the end of its wind-down process are unclear. While we do not expect losses for senior unsecured creditors, we do not fully exclude the possibility that such liquidation could include the transfer of assets and liabilities to external third parties, most likely other banks.
WestImmo's rating Outlook is driven by that of its parent and by support dynamics between NRW, EAA and WestImmo. Therefore, it is primarily sensitive to changes in EAA's commitment to WestImmo. In addition, WestImmo's IDR and SR are sensitive to changes to EAA's IDR and Outlook, to changes in Fitch's view of support as a result of developments in the regulatory and legal framework and to significant changes in the relationship between EAA and NRW, although Fitch considers the latter scenario to be highly unlikely for the foreseeable future. In addition, a sale of WestImmo would most likely have a negative impact on its ratings, depending on the profile of the new owner.
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