The ratings on Austria-based Landes-und Hypothekenbank Vorarlberg AG (Hypo Vorarlberg) are based on the deficiency guarantee (Ausfallsbürgschaft) of the bank's majority (71.2%) owner, the State of Vorarlberg (Vorarlberg; AAA/Stable/A-1+). Although the deficiency guarantee is not timely, Standard&Poor's believes that as long as the state is the majority owner and guarantor for all of the bank's obligations, the state has a strong economic incentive to support the bank in a timely fashion as: It would not be beneficial to the state to tarnish its own reputation as an issuer in the capital markets; The deficiency guarantee covers both full payment of principal and interest--including post insolvency interest; and Hypo Vorarlberg has an ongoing importance for the local economy. Standard
