DBRS Discontinues and Withdraws Ratings on Portigon AG (former WestLB)

DBRS Ratings Limited (DBRS) has today discontinued and withdrawn its ratings on Portigon AG including the Long-Term Debt and Deposit rating of A (high), the Short-Term Debt and Deposit rating of R-1 (middle) and the Subordinated Long-Term Notes rating of A. All ratings were placed Under Review Developing on 15 September 2011 pending the final break-up of the former WestLB AG. This rating action follows the legal transfer of most assets and liabilities to Helaba (NR) and Erste Abwicklungsanstalt (EAA - NR) announced on 17 September 2012.

WestLB’s name was changed to Portigon AG effective 2 July 2012 and the process of legally separating the business of the former Landesbank into three parts was completed on 17 September, retroactive in portions to 1 July and 1 January 2012. The savings bank operations of the former WestLB, including the public sector and SME lending operations, were spun off and transferred to Helaba. Meanwhile, the remaining banking assets were transferred to EAA, which is directly and indirectly owned by the State of North Rhine Westphalia and its Savings Banks. Portigon AG is ultimately 100% owned by North Rhine Westphalia. Going forward, Portigon AG will operate as a portfolio service entity and is targeted for privatisation by 2016.

In parallel, the majority of former WestLB’s obligations were legally transferred on 17 September 2012 to new issuers with retroactive effect. Senior Long-Term and Short-Term obligations went to either Helaba or EAA, whereas subordinated liabilities remain with Portigon AG. In DBRS’s view, the obligations transferred to Helaba now reflect the credit dynamics of the Frankfurt-based Landesbank. DBRS notes that those senior obligations transferred to EAA no longer benefit from the joint liability support scheme of the Sparkasse Finanzgruppe, whereas Portigon AG remains an associate member of the scheme until privatisation. In DBRS’s view, the credit dynamics of both EAA and Portigon AG are now linked via ownership to the German State of North Rhine Westphalia. Whereas the obligations transferred to EAA look to be supported until the run-off is completed, DBRS views the subordinated debt left with Portigon AG as more vulnerable to downside risk, particularly as the specifics of any future privatisation are unknown.

DBRS endeavours to complete rating reviews prior to the withdrawal of ratings. However, in the case of Portigon AG, DBRS does not publicly rate its owner, the State of North Rhine Westphalia. As such, the ratings have been discontinued and withdrawn.

Notes:

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organizations. Other methodologies used include the DBRS Criteria – Intrinsic and Support Assessments, Rating Bank Subordinated Debt and Hybrid Instruments with Discretionary Payments, and Rating Bank Preferred Shares and Equivalent Hybrids. All can be found on the DBRS website under Methodologies.

The sources of information used for this rating include publicly available company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Peter Burbank
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 5 July 2006
Most Recent Rating Update: 15 September 2011

For additional information on this rating, please refer to the linking document under Related Research.