Moody's rates Volkswagen notes Baa2

Moody's Investors Service said it assigned a Baa2 long-term rating to Volkswagen Aktiengesellschaft's proposed issuance of undated euro-denominated subordinated notes issued by Volkswagen International Finance NV guaranteed by Volkswagen Aktiengesellschaft.

The size of the hybrid debt remains subject to market conditions.

Moody's said the Baa2 rating assigned to Volkswagen's hybrid debt is two notches below the company's senior unsecured rating of A3. This rating differential reflects the deeply subordinated nature of the hybrid debt. The hybrid: (a) is a perpetual instrument; (b) is senior only to common equity; (c) provides Volkswagen with the option to defer coupons on a cumulative basis; and (d) has no step-up prior to year 10 and none beyond 100 basis points overall, the agency said.

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