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RPT-Fitch Assigns State of Hamburg's Scheduled Increased Bond Issue Expected 'AAA(EXP)' Rating
April 9, 2013 / 9:48 AM / 5 years ago

RPT-Fitch Assigns State of Hamburg's Scheduled Increased Bond Issue Expected 'AAA(EXP)' Rating

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April 9 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned the State of Hamburg’s bond, ISIN DE000A1H3ER6, due 18 January 2019 to be increased by EUR250m to a new outstanding of EUR750m effective 11 April 2013, an expected Long-term local currency rating of ‘AAA(EXP)'. This is the first issue of Hamburg to be rated by Fitch.

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 the State of Hamburg, 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 Hamburg 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 city-state of Hamburg is located in the north of Germany with a population of about 1.8 million at end-2012. Its GDP of EUR95.8bn accounted for almost 3.6% of national GDP in 2012. Its GDP per capita of EUR53,091 is by far the highest among the 16 German states and 65% above Germany’s average of EUR32,281. The unemployment rate was 7.6% in March 2013, roughly in line with that of Germany (7.2%).

Hamburg plans to increase the outstanding amount of the existing fixed rate senior unsecured notes due 18 January 2019 by EUR250m to EUR750m with an effective date of 11 April 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.

RATING SENSITIVITES

A negative rating action would be triggered by a change in Germany’s ratings. Any change in the support scheme would require a review of the rating.

RATING ASSUMPTIONS

The rating is sensitive to a number of assumptions.

- Fitch assumes no change in the support mechanisms linking the rating of the Laender to that of the Bund.

- Fitch assumes no change in the financial equalisation system in place.

- Fitch further assumes the Laender will have future good access to liquidity and their active liquidity management and proper treasury facilities to remain sophisticated.

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