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TEXT-Fitch rates Hypo Alpe-Adria Bank International notes
November 26, 2012 / 4:56 PM / in 5 years

TEXT-Fitch rates Hypo Alpe-Adria Bank International notes

Nov 26 - Fitch Ratings has assigned Hypo Alpe-Adria Bank International AG's
(Hypo Alpe) EUR1bn government-guaranteed Tier 2 subordinated notes an expected
rating of 'AAA(exp)'.

Fitch does not rate Hypo Alpe itself and the expected rating is entirely based
on Fitch's expectation that the Republic of Austria ('AAA'/Stable) will honour
the unconditional, unsubordinated and irrevocable guarantee provided to holders
of the subordinated notes in a full and timely manner. As a result, the expected
rating of the notes is in line with the sovereign rating of Austria.

According to the notes' draft documentation, the Republic of Austria guarantees
the note holders the "due and punctual" payment of any and all amounts
originally scheduled to be due and payable by Hypo Alpe under the subordinated
notes. The guarantee for the notes has been issued under Austria's 2008
Financial Markets Stability Act (Finanzmarktstabilitaetsgesetz; FinStaG). Under
the FinStaG, Austria can provide capital and funding support to Austrian banks
up to a limit of EUR15bn. As of end-Q312, EUR12.2bn of this limit had been
utilised, EUR4.1bn for participation capital and EUR8.1bn for various other
capital or funding support measures.

The notes currently qualify as Lower Tier 2 capital under the Austrian Banking
Act and Fitch understands that Hypo Alpe expects the notes to qualify as Tier 2
capital under the Basel III implementation in the European Union.

According to the draft guarantee, should the notes - for example due to
regulatory or other developments such as statutory loss absorption under the EU
Crisis Management Directive - bear losses by way of write-down or conversion to
equity, the guarantor would guarantee continued and punctual payment of the
originally scheduled interest and principal payment amounts.

RATING DRIVERS AND SENSITIVITIES
The expected rating of the notes is sensitive to changes in Austria's sovereign
rating and a downgrade of Austria's sovereign rating would lead to a downgrade
of the subordinated notes.

In 2009, Hypo Alpe issued four government-guaranteed senior unsecured notes
(totalling EUR1.35bn) under Austria's Interbank Market Support Act
(Interbankmarktstaerkungsgesetz - IBSG). However, this programme expired at
end-2010 and Hypo Alpe's final government-guaranteed senior unsecured note
(EUR1bn; rated 'AAA'; XS0440690161) will mature in July 2013.

Hypo Alpe, a medium-sized Austrian bank with a strong presence in South Eastern
Europe, has been 100% owned by the Republic of Austria since late 2009. In
November 2012, Hypo Alpe started the privatisation process of its SEE
subsidiaries.

In December 2011, the Austrian banking regulator (Finanzmarktaufsicht) announced
that Hypo Alpe had to remedy a EUR1.5bn capital shortfall by end-2012.


Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15
August 2012, are available at www.fitchratings.com.

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria

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