Fitch Rates State of Bremen's EUR250m Bond Final 'AAA'

Fitch Ratings has assigned the State of Bremen's EUR250m fixed-rate bond (DE000A11QJ24), due 28 October 2016, a final Long-term local currency rating of 'AAA'. The senior unsecured issue ranks pari passu with all Bremen's other outstanding debt.

KEY RATING DRIVERS

The rating reflects the strong mutual support mechanisms that apply to all members of the German Federation, including the State of Bremen, and the extensive liquidity facilities they benefit from, which ensure timely debt and debt service payment.

Fitch notes that the support mechanisms apply uniformly to all members of the German Federation: the Federal Republic of Germany (AAA/Stable/F1+) represented by the federal government (Bund) and the 16 federated states, which includes the State of Bremen undertaking this issue. All Laender are equally entitled to financial support in the event of financial distress irrespective of differences in economic and financial performances.

The State of Bremen is located in northern Germany and had a population of about 663,300 inhabitants at end-2013. The city-state is the smallest of the 16 German states and consists of the cities Bremen and Bremerhaven. Its EUR28.6bn GDP accounted for 1% of national GDP in 2013. Its GDP per capita of EUR43,085 is the second highest among the German states and 29% above Germany's average of EUR33,355.

The new EUR250m issue's liquidity is underpinned by the safe cash management system the Laender operate in, which allows overnight cash exchanges between Laender and the Bund when necessary, and recourse to appropriate short-term credit lines. The issue is zero risk-weighted and European Central Bank repo-eligible.

RATING SENSITIVITIES

A downgrade of the sovereign ratings could lead to a downgrade of the Laender. An adverse change of an important institutional feature (solidarity principle, equalisation system, liquidity exchange mechanism) would result in a review of the Laender's ratings.