OREANDA-NEWS. September 28, 2015. Fitch Ratings has placed Volkswagen Bank RUS LLC's (VWBR) bonds' 'BBB+' rating on Rating Watch Negative (RWN). The rating action follows the placement of the bank's ultimate parent Volkswagen AG (VWAG, A/RWN) on RWN.

KEY RATING DRIVERS
The RWN on VWBR's bond ratings mirrors that on its ultimate parent VWAG (see "Fitch Places Volkswagen on Rating Watch Negative" dated 23 September 2015 at www.fitchratings.com).

VWBR's bond ratings are driven by potential support from Volkswagen Financial Services AG (VWFS AG), a wholly owned subsidiary of VWAG. Should VWBR fail to make a coupon or principal payment under the terms of the bonds, bondholders will benefit from a public irrevocable offer (PIO) that would allow them to sell the bonds to VWFS AG.

Although unlikely, the PIO could be terminated under certain conditions that are beyond VWFS AG's control, including impossibility of payments and settlements in Russia, nationalisation of VWBR, war or revolution, and circumstances under which none of the internationally recognised rating agencies assigns a credit rating to the Russian Federation. Given the exposure of the structure of the placement to these quite extreme forms of country risk, the rating of the bonds is capped at a level no higher than two notches above Russia's sovereign ratings (BBB-/Negative).

RATING SENSITIVITIES
Fitch expects to resolve the RWN on VWBR's bond ratings once the RWN on the parent is resolved. Fitch may downgrade VWBR's bond ratings if VWAG's ratings are downgraded by more than two notches. VWBR's bond ratings could be affirmed if VWAG's ratings are affirmed or downgraded by one or two notches.

The downgrade of Russia's sovereign ratings and/or termination of PIO may result in the downgrade of VWBR's bond ratings.