Moody's cuts Allgemeine Hypothekenbank

Moody's Investors Service downgraded the long-term debt and bank deposit ratings of Allgemeine Hypothekenbank Rheinboden AG to Ba3 from Baa3 and the short-term debt and deposit ratings to Not Prime from Prime-3. The bank's subordinated debt rating also was downgraded to B1 from Ba1.

The outlook is negative.

The rating for the bank's profit participation rights was confirmed at Ca with a stable outlook. The E financial strength rating was affirmed and the outlook was changed to positive.

These actions conclude the rating review begun on Dec. 23, 2005.

The downgrade reflects Moody's concern that the bank receives a weaker level of support than in the past. Furthermore, in Moody's view, the likelihood of medium- to long-term support from majority owner Lone Star Funds may ultimately reflect the relative future success of the company's still unproven business model and the potential investment exit strategies available.

In affirming the bank's financial strength rating, Moody's noted the progress made by the bank in preparing itself as a future specialized institution serving the commercial real estate and capital markets.

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