Fitch cuts Allgemeine Hypothekenbank subordinated debt to BB

Fitch Ratings said it affirmed Allgemeine Hypothekenbank Rheinboden's issuer default rating at BBB-, short-term rating at F3 and support rating at 2 while it upgraded the bank's individual rating to D from D/E. Fitch downgraded the company's outstanding mortgage Pfandbriefe to AA from AA+ and affirmed the bank's outstanding public-sector Pfandbriefe at AAA. The bank's subordinated obligations have been downgraded to BB from BB+ and its profit participation rights maturing in 2008 have been upgraded to CC/RR5 from C/RR6, reflecting Fitch's opinion that their recovery prospects have modestly improved. The genussscheine maturing after 2008 were affirmed at CC/RR5.

All ratings have been removed from Rating Watch negative and a stable outlook was assigned.

The upgrade of the bank's individual rating reflects Fitch's opinion that despite its expected 2006 losses, the bank is no longer in need of external support due to the progress in restructuring and its adequate capitalization, Fitch said.

The ratings reflect Fitch's opinion that the probability of external support remains high, should it be required. In case of financial difficulties, Fitch said it believes that Germany's private-sector banks would arrange timely support for the company's senior unsecured obligations in line with the action taken in 2005.

However, the agency said it appears likely that obligations that form part of the bank's regulatory capital could be expected to absorb losses, resulting in a lower, but still moderate, probability of support for subordinated debt.

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