DBRS Rates EFSF AAA with Stable Trend

DBRS, Inc. (DBRS) has today assigned AAA issuer ratings on the long-term foreign and local currency debt of the European Financial Stability Facility (EFSF). The trend on both ratings is Stable.

The ratings reflect DBRS’s belief that given strong political support for the EFSF by Euro area member states, the guarantors remain committed to providing their allotted guarantees to the EFSF. The ratings also reflect the fact that the aggregate guarantees of the strongest group of AAA-rated member countries is greater than the EFSF’s lending capacity.

The Stable trends are largely based on the Stable trends of the sovereign ratings of the strongest group of guarantors, and especially Germany and France. In the event that DBRS were to downgrade either Germany or France, the EFSF rating would follow, since the EFSF lending capacity would then exceed the over-guarantee provided by the AAA-rated member states.

The key rating considerations are (1) that the guarantors remain committed to providing their allotted guarantees, (2) the actual loss experience by borrower member countries to date, (3) the outstanding DBRS sovereign ratings of guarantor countries, and (4) a default recovery assumption.

Notes:
The primary applicable methodology is Rating Supranational Institutions – European Financial Stability Facility (EFSF), which can be found on the DBRS website under Methodologies.

The sources of information used for this rating include the EFSF, and DBRS. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: Fergus McCormick
Rating Committee Chair: Alan G. Reid
Initial Rating Date: July 27, 2012
Most Recent Rating Update: July 27, 2012

For additional information on this rating, please refer to the linking document under Related Research.