(The following statement was released by the rating agency)
Feb 15 - Fitch Ratings has assigned the State of Thuringia’s increased bond issue an expected Long-term local currency rating of ‘AAA(EXP)'. This is Thuringia’s second issue to be rated by Fitch.
The final rating is contingent upon the receipt of final documents conforming to information already received.
Thuringia plans to increase the outstanding amount of the existing fixed rate senior unsecured notes due 17 August 2020 by EUR350m to EUR600m effective 20 February 2013. The 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 (ECB) repo-eligible.
The rating reflects the strong support mechanisms that apply to all members of the German Federation, including the State of Thuringia, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment.
Fitch notes that the support mechanisms apply uniformly to all members of the German Federation: the Federal Republic of Germany (‘AAA’/Stable/‘F1+') represented by the federal government (Bund) and the 16 federated states, which includes the State of Thuringia 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.
Thuringia is located in eastern Germany and had a population of about 2.2 million at end-2012. Its capital is the City of Erfurt. Its GDP of EUR48.1bn accounted for almost 2% of national GDP in 2011. Its GDP per capita of EUR21,608 is 31% below Germany’s average of EUR31,440. The unemployment rate was 9.5% in January 2013, above that of Germany (7.4%) but well below that of eastern Germany (11.5%). Thuringia’s unemployment rate was the lowest among the eastern states in January 2013.
Link to Fitch Ratings’ Report: State of Thuringia