DBRS downgrades Volkswagen

DBRS said it downgraded the short- and long-term debt ratings of Volkswagen AG to R-2 (high) from (R-1 (low) and to BBB (high) from A (low), respectively.

The downgrades reflect continuing and consequential headwinds associated with Volkswagen’s (diesel) vehicle emissions controversy.

With this action, Volkswagen is removed from under review with negative implications, where it was initially placed on Sept. 23, 2015.

While developments have been numerous and will persist going forward, DBRS said recent events have culminated in the company’s increasing incurred provisions to €16.2 billion from the prior level of €6.7 billion.

The trend on the ratings is negative, as, notwithstanding the substantially increased provisions assumed by the company, DBRS estimates that total costs associated with the emissions issue are still likely to prove considerably higher, with the ultimate impact on Volkswagen’s financial and business risk profiles remaining somewhat uncertain.

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