Erste Abwicklungsanstalt

Our stable outlook on EAA reflects that we do not expect changes to the ownership structure or strong commitment from NRW in the next two years. The outlook also mirrors that on NRW, signifying our expectation that the state will, if at all, only face a mild recession this year. Although having to bear its share of the cost of Germany's various economic stimulus measures, we anticipate that deficit spending under the state's new Ukraine-war-related special purpose account will remain moderate and the renewed suspension of the debt-brake law's zero deficit target limited to 2023. Furthermore, we believe that recent tax breaks will cause NRW's revenue growth to remain subdued, despite inflationary effects. We would lower our ratings on EAA

...S&P Global ratings expects support for Erste Abwicklunganstalt (EAA) from NRW (##/Stable/A-1+) if needed. Our ratings reflect our belief that EAA will be supported by its owners under any scenario if continuing losses exceed its capital base. However, we consider this scenario unlikely. We expect EAA's winddown pace to slow. While EAA has exceeded the targets of its original winddown plan in recent years (see chart 1), we expect the pace will gradually slow over the coming years. This is because the remaining assets are increasingly difficult to sell in the market. We expect only a limited direct impact from current economic headwinds on EAA. However, in the higher interest rate environment, there could be fewer favorable market opportunities for it to sell assets, since more attractive alternatives have emerged for potential investors....

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