August 22, 2014 / 2:32 PM / in 3 years

Fitch Affirms Hypo Alpe's Government-Guaranteed Tier 2 Notes at 'AAA'

(The following statement was released by the rating agency) LONDON/WARSAW, August 22 (Fitch) Fitch Ratings has affirmed Hypo Alpe-Adria Bank International AG's (Hypo Alpe) EUR1bn government-guaranteed Tier 2 subordinated notes (ISIN: XS0863484035) maturing in 2022 at 'AAA'. The notes' rating is aligned with the sovereign rating of Austria (AAA/Stable; affirmed on 15 August 2014) based on Fitch's expectation that the Austrian central government will honour the unconditional and irrevocable guarantee provided to holders of the subordinated notes. Fitch does not rate Hypo Alpe nor does it rate any other debt instruments issued by Hypo Alpe. KEY RATING DRIVERS According to the notes' documentation, the Republic of Austria guarantees the note holders the "due and punctual" payment of all obligations payable by Hypo Alpe under the subordinated notes. The notes have remained unaffected by special legislation implemented in early August 2014 to impose losses on certain subordinated notes guaranteed by the state of Carinthia (not rated), Hypo Alpe's previous owner. The finance ministry publicly stated in a press release dated 11 June 2014 that "subordinated debt guaranteed by the Republic of Austria is not affected by the restructuring". Consequently, the rated notes have not been included in a list of affected notes published by the Austrian Financial Market Authority on 7 August 2014. In Fitch's view, the Austrian government's measures to declare sub-national guarantees void does not indicate a materially diminished willingness to honour its own federal guarantees. In Fitch's opinion, the creditworthiness of the notes will also remain unaffected by regulatory changes such as the introduction of the EU Bank Recovery and Resolution Directive. According to the guarantee, should the notes - due to regulatory or other developments including statutory loss absorption - bear losses such as a write-down, conversion into equity or any other resolution measure, then the guarantor would guarantee continued and punctual payment of the originally guaranteed payment amount according to the interest and principal payment schedule. The guarantee for the notes has been issued under Austria's 2008 Financial Markets Stability Act (Finanzmarktstabilitatsgesetz - FinStaG). Under the FinStaG, Austria can provide capital and funding support to Austrian banks up to a recently increased limit of EUR22bn. RATING SENSITIVITIES The rating of the notes is sensitive to changes in Austria's sovereign rating. A downgrade of Austria's rating would lead to a downgrade of the subordinated notes. Since Fitch expects the Republic of Austria to honour the guarantee for the Tier 2 notes irrespective of the creditworthiness of Hypo Alpe, the bank's risk profile does not represent a rating sensitivity for the rating of the notes. Since late 2009 Hypo Alpe is fully owned by the Republic of Austria, which has supported the bank with sizeable capital injections and capital guarantees (most recently with a EUR750m capital injection in April 2014). Its Austrian subsidiary bank was sold to private sector investors in 2013 and its foreign banking subsidiaries, largely in Central and Eastern Europe, were put up for sale. In early March 2014, the Austrian finance ministry announced that the remainder of Hypo Alpe would be subject to an orderly wind-down process. In early June 2014, the Austrian finance minister announced that special legislation would be implemented with the aim of imposing losses of around EUR1.7bn on investors in Hypo Alpe's subordinated debt instruments that had been guaranteed by the bank's previous owner, the state of Carinthia (EUR890m), and on Bayerische Landesbank (Bayern LB) which had owned Hypo Alpe between 2007 and 2009 (EUR800m). Contact: Primary Analyst Christian Kuendig Senior Director +44 20 3530 1399 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Erwin van Lumich Managing Director +34 93 323 8403 Committee Chairperson Artur Szeski Senior Director +48 22 338 6292 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, are available at Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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