Moody’s cuts VW Financial debt, ups VW Bank debt

Moody's Investors Service said it downgraded the long-term debt ratings of Volkswagen Financial Services AG and of its guaranteed subsidiaries to A2 from A1.

At the same time, the agency upgraded the long-term debt rating of Volkswagen Bank GmbH (VW Bank) to Aa3 from A1.

As part of the action, Moody's affirmed the Aa3 long-term deposit ratings of VW Bank.

The outlooks for VW Financial’s long-term debt and for VW Bank's long-term debt and deposits remain negative, reflecting the negative outlook on Volkswagen AG (Volkswagen, long-term issuer rating A3 negative).

The Prime-1 short-term debt ratings of VW Financial and its guaranteed subsidiaries, and VW Bank's Prime-1 short-term debt and deposit ratings were affirmed. Moody's also affirmed VW Financial’s and VW Bank's Aa3(cr)/Prime-1(cr) counterparty risk assessments, and VW Bank's Baa1 subordinated debt ratings, baa2 baseline credit assessment and a3 adjusted BCA.

The downgrade of the long-term debt ratings of VW Financial and its guaranteed subsidiaries to A2 from A1 reflects the agency's view that senior unsecured creditors of VW Financial and of guaranteed subsidiaries will face higher losses in the unlikely event of failure than Moody's previously anticipated.

At the same time, the upgrade of VW Bank's long-term debt ratings reflects Moody's view that these instruments will face only extremely low losses upon a failure of the bank, the agency added.

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