Moody’s downgrades NORD/LB, subsidiaries

Moody's Investors Service said it downgraded the ratings of Norddeutsche Landesbank GZ (NORD/LB) and of its rated subsidiaries Deutsche Hypothekenbank AG (Deutsche Hypo), Bremer Landesbank Kreditanstalt Oldenburg GZ (BremerLB) and NORD/LB Luxembourg SA Covered Bond Bank.

Among the ratings affected were, as far as assigned to each entity, the banks' long-term deposit and senior unsecured ratings, which were downgraded to Baa2 from Baa1, the long-term senior unsecured debt and issuer ratings which were downgraded to Baa3 from Baa2, and the subordinated debt ratings, which were downgraded to B1 from Ba3.

Furthermore, Moody's downgraded the banks' assessments, including the long-term counterparty risk assessments to Baa2(cr) from Baa1(cr), the baseline credit assessments (BCA) to b2 from b1 and the adjusted BCAs to ba3 from ba2.

The agency confirmed all short-term ratings, including all debt and deposit ratings at P-2, all program ratings at (P)P-2 and all counterparty risk assessments at P-2(cr).

The banks' long-term deposit, senior unsecured as well as senior unsecured and issuer ratings carry a negative outlook.

The Aa1-rated guaranteed debt ratings of NORD/LB and BremerLB and the Caa2 (hyb) ratings of NORD/LB's non-cumulative preference share vehicles, Fuerstenberg Capital GmbH (I) and Fuerstenberg Capital II GmbH, were unaffected.

"While NORD/LB made adequate progress in its de-risking program, supported by a less adverse shipping market environment than in 2016 we believe that the bank will only gradually rebuild a sufficient degree of resilience against adverse ship market value and freight rates scenarios, leaving it significantly exposed to solvency risks within the next 12 to 18 months," Moody's vice president Bernhard Held said in a news release.

These actions conclude the review for NORD/LB and its affiliates opened on April 18 and reflect the agency’s view that the success of NORD/LB's measures to de-risk the bank and stabilize its capitalization depends to a significant degree on the future development of shipping markets, Moody’s explained.

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