OREANDA-NEWS. Fitch Ratings has assigned the State of Saarland's scheduled EUR250m fixed-rate bonds DE000A11P8Q8, due 28 October 2021, an expected Long-term rating of 'AAA(EXP)'. The senior unsecured bond ranks pari passu with all of Saarland's other outstanding debt.

The final rating is contingent upon the receipt of final documents conforming to information already received.

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

The support mechanism applies uniformly to all members of the German Federation: the Federal Republic of Germany (AAA/Stable) represented by the federal government (Bund) and the 16 federated states, which include the State of Saarland 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 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.

Saarland is located in western Germany bordering France and Luxembourg internationally. At end-2013, the population was 1,007,300. Its capital is the City of Saarbruecken. Its GDP of EUR33.5bn accounted for almost 1.2% of national GDP in 2014. Its GDP per capita of EUR32,333 is roughly in line with Germany's average of EUR34,129. The unemployment rate was 7.1% in September 2015, above that of Germany (6.2%).

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