S&P cuts Allgemeine Hypothekenbank Rheinboden

Standard & Poor's said it lowered its ratings on subordinated debt issued by Allgemeine Hypothekenbank Rheinboden AG to B from BB.

The ratings, including the BB+ counterparty credit and senior unsecured ratings, remain on CreditWatch with negative implications.

At the same time, the AAA ratings on senior secured Öffentliche Pfandbriefe and Hypothekenpfandbriefe issued by the bank were affirmed.

The ratings are based on S&P's expectation that initiatives to resolve Allegmeine's future are moving toward an orderly solution.

Nevertheless, S&P said it believes that the holders of Pfandbriefe and senior unsecured debt are in a substantially better position than holders of subordinated debt.

It remains unclear whether Allgemeine will be taken over or liquidated. Therefore, the downgrade of the ratings on subordinated debt obligations reflects that, on a stand-alone basis, the bank is unlikely to sustain its operations without support and that in a liquidation scenario subordinated debt holders would be more likely to incur losses, given that its subordinated debt is treated as regulatory capital, S&P said.

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