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Fitch Rates Mecklenburg-Western Pomerania's EUR500m Bond 'AAA(EXP)'
June 11, 2014 / 3:10 PM / 3 years ago

Fitch Rates Mecklenburg-Western Pomerania's EUR500m Bond 'AAA(EXP)'

(The following statement was released by the rating agency) FRANKFURT/LONDON/PARIS, June 11 (Fitch) Fitch Ratings has assigned Mecklenburg Western-Pomerania's (Mecklenburg) EUR500m bonds (DE000A12TWL1), due 18 June 2024, an expected Long-term rating of 'AAA(EXP)'. This is Fitch's first issue rating on the region. The senior unsecured bond ranks pari passu with all Mecklenburg's other outstanding debt. The final rating is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS The rating reflects the strong support mechanisms that apply to all members of the German Federation, including Mecklenburg undertaking this issue, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment. The support mechanism applies uniformly to all members of the German Federation: the Federal Republic of Germany (AAA/Stable) represented by the federal government (Bund) and the 16 federated states, which include Mecklenburg undertaking this issue. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performances. The new EUR500m issue's liquidity is underpinned by the safe cash management system the Laender operate in, which allows overnight cash exchanges between Laender and the Bund when necessary, and recourse to appropriate short-term credit lines. The issue is zero risk-weighted and European Central Bank repo-eligible. Mecklenburg is located in north-east Germany and had a population of about 1.62 million at end-2013. Its capital is the City of Schwerin. Its GDP of EUR37bn accounted for almost 1.4% of national GDP in 2013. Its GDP per capita of EUR22,817 is about 32% below Germany's average. Since 2006 the state has not accumulated new debt and has the fourth lowest level of indebtedness per capita within the national context. The unemployment rate was 10.9% in May 2014, above that of Germany (6.8%) and slightly above that of eastern Germany (9.7%). RATING SENSITIVITIES A downgrade of the sovereign ratings could lead to a downgrade of the Laender and consequently the bond's rating. An adverse change of an important institutional feature (solidarity principle, equalisation system, liquidity exchange mechanism) would result in a review of the German Laender ratings. Contacts: Primary Analyst Guido Bach Senior Director +49 69 768076 111 Fitch Deutschland GmbH Taunusanlage 17, 60325 Frankfurt am Main Secondary Analyst Nilay Akyildiz Director +49 69 768076 132 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria 'Tax-Supported Rating Criteria', dated 14 August 2012, and 'International Local and Regional Governments Rating Criteria', dated 23 April 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Tax-Supported Rating Criteria here International Local and Regional Governments Rating Criteria - Outside the United States 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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