Öykü Altuntaş / Frankfurt, Nov 6 () – International ratings company announced it has downgraded the long-term debt ratings of Volkswagen Financial Services AG, its guaranteed subsidiaries and Volkswagen Bank GmbH, to A1 from Aa3.
The company has approved it had installed a "defeat device" on several diesel models for years to hide the actual gas emissions in use, from regulators of the cars.
Moody’s announced, on Nov. 6, that the outlook remained negative for long-term debt and developing for VW Bank's deposit ratings, over the scandal.
Meanwhile, the Prime-1 short-term debt and deposit ratings of the aforementioned institutions and VW Bank's baa2 baseline credit assessment (BCA) were affirmed, the statement said.
Accordingly, Moody’s also downgraded VW Bank's subordinate debt ratings to Baa1 from A3 and the entity's adjusted BCA to a3 from a2. The long-term Counterparty Risk Assessments (CRA) of VW Bank and VW FS AG were downgraded to Aa3(cr) from Aa2(cr) and the short-term CRAs were affirmed at Prime-1(cr).
“Knock-on effects from Volkswagen remains a risk factor”
In its statement, Moody's underlined the VW Bank's standalone profile was affirmed, but knock-on effects from Volkswagen remained a risk factor.
The statement stressed “Moody’s has affirmed the baseline credit assessment (BCA) of VW Bank, reflecting its flexibility to offset current headwinds for wholesale market funding by less confidence-sensitive funding channels, including deposits and asset-backed securities in its funding mix”.
“Moody's believes Volkswagen will remain committed to protecting its captive finance subsidiaries from the financial fallout stemming from irregularities in the company's automotive business, helping to mitigate future asset risks related to dealer financing and residual car values, and profitability pressure on Volkswagen's bank and leasing operations” urged Moody’s.