Moody’s downgrades Volkswagen

Moody's Investors Service said it downgraded the long-term senior unsecured debt and issuer ratings of Volkswagen Bank GmbH (VW Bank) by three notches to A3 from Aa3.

At the same time, the agency downgraded the bank's long-term deposit ratings to A1 from Aa3 and the long-term senior unsecured ratings of Volkswagen Financial Services AG (VW FS AG) and of its guaranteed subsidiaries to A3 from A2, as well as VW FS AG's issuer rating to A3 from A2.

The outlooks remain negative.

In addition, Moody’s affirmed VW Bank's Baa1 subordinated debt ratings, baa2 baseline credit assessment (BCA), a3 adjusted BCA and Aa3(cr)/P-1(cr) counterparty risk assessments, and withdrew the counterparty risk assessments of Volkswagen Financial.

“Effective 1 September 2017, Volkswagen Aktiengesellschaft (Volkswagen, issuer rating A3 negative) reorganized its financial services operations to streamline its regulatory structure with its European banking operations now coming under the umbrella of VW Bank, and other financial services under the umbrella of VW FS AG,” Moody’s said in a news release.

“Previously, VW FS AG had acted as the financial holding company of VW Bank, which was a fully consolidated subsidiary. Both entities are now directly owned by Volkswagen and maintain control and profit and loss transfer agreements with the carmaker.”

Moody’s said the downgrade of Volkswagen Financial's debt and issuer ratings reflects the entity's transfer of VW Bank and its subsidiaries with European Union banking operations to Volkswagen.

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