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Moody's upgrades Commerzbank Capital Funding Trust II to Ba2 from B1(hyb).

Summary: Commerzbank Capital Funding Trust I and III affirmed at B1(hyb), outlook changed to positive

Moody's Investors Service has today

upgraded to Ba2 from B1(hyb) the subordinated instrument issued by

Commerzbank Capital Funding Trust II (XS0248611047). The upgrade and the

removal of the hybrid (hyb) indicator from this rating follows an

announcement by Commerzbank AG (Commerzbank, deposits B1 stable, BFSR

D+/BCA ba1 stable) on 16 January 2014 that it has restructured the

non-cumulative Trust Preferred Security into a Trust Lower Tier 2 (Trust

LT2) Security. The outlook on the Ba2 rating is stable, in line with the

outlook on Commerzbank's other rated obligations.

Commerzbank's announcement follows a court decision on 16 July 2013 of

the Chancery Court of the State of Delaware, ruling that holders of

instruments issued by Commerzbank Capital Funding Trust II should be

treated pari passu with holders of the restructured Silent Partnership

Certificates issued by Dresdner Funding Trust IV (Dresdner FT IV) which

Moody's rates Ba2 stable.

Concurrently, Moody's affirmed the B1(hyb) ratings for the securities

issued by Commerzbank Capital Funding Trust I and III (DE000A0GPYR7,

DE000CK45783), and changed the outlook for these ratings to positive

from stable. The positive outlook reflects Moody's view that there may

be positive implications from the Delaware court decision for holders of

these instruments.

All other ratings of Commerzbank group are unaffected by today's rating

action.

RATINGS RATIONALE

Moody's two-notch upgrade of the restructured Trust LT2 of Commerzbank

Capital Funding Trust II to Ba2, and the removal of the hybrid indicator

from this rating, was prompted by the communication of Commerzbank (on 16

January 2014) that it has amended the documentation of this instrument.

The amendment entails (1) the removal of the coupon skip triggers from

the documentation; and (2) the elevation to Lower Tier 2 ranking (from

Tier 1) in liquidation. As a consequence, the risk profile of these

instruments closely resembles that of senior subordinated (Lower Tier 2)

debt issued by Commerzbank AG, which is rated one notch below

Commerzbank's adjusted baseline credit assessment (adjusted BCA) of ba1.

Commerzbank made the amendment in consideration of a court ruling on 16

July 2013 which requires the bank to elevate the respective securities

to the same Lower Tier 2 capital class as is applicable for the

instruments issued by Dresdner FT-IV, and to remove the profit-dependent

trigger.

The affirmation and outlook change to positive from stable of Commerzbank

Capital Funding Trust I and III reflects Moody's assumption that

Commerzbank may decide to treat holders of instruments of the three

Funding Trusts the same, implying that Commerzbank Capital Funding Trust

I and III may be restructured in a similar fashion at a later date.

This, in turn, is based on (1) the Delaware court ruling; and (2)

Moody's understanding that investors in the two Trusts not subject to the

ruling may have similar rights of treatment as investors in Capital

Funding Trust II. However, Commerzbank Capital Funding Trust I and III

are only indirectly affected, if at all, and will not necessarily be

subject to court decisions in the future, although Moody's notes that the

securities of Commerzbank Capital Funding Trust I are the subject of

currently pending litigation in Delaware.

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Publication:EMBIN (Emerging Markets Business Information News)
Date:Jan 21, 2014
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