The ratings on Austria-based Vorarlberger Landes-und Hypothekenbank AG (Hypo Vorarlberg) are based on the grandfathered deficiency guarantee (Ausfallsbürgschaft) of the bank's 71.2%-majority owner, the State of Vorarlberg (Vorarlberg; AAA/Stable/A-1+). The ratings on Hypo Vorarlberg therefore reflect the credit quality of the State of Vorarlberg. Although the grandfathered deficiency guarantee is not a timely guarantee, Standard&Poor's believes that, as long as the state remains the majority owner and guarantor for all of the bank's obligations, it has a strong economic incentive to support the bank in a timely fashion as: The deficiency guarantee covers both full payment of principal and interest--including post insolvency interest; Hypo Vorarlberg plays an ongoing important role in the local economy; and It would not
