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Fitch Affirms Hypo Alpe's Government-Guaranteed Tier 2 Notes at 'AAA'

(The following statement was released by the rating agency) LONDON, November 26 (Fitch) Fitch Ratings has affirmed Hypo Alpe-Adria Bank International AG's (Hypo Alpe) EUR1bn government-guaranteed Tier 2 subordinated notes (ISIN: XS0863484035) maturing in 2022 at 'AAA'. The rating of the notes is aligned with the sovereign rating of Austria (AAA/Stable) based on Fitch's expectation that the government will honour the unconditional and irrevocable guarantee provided to holders of the subordinated notes. Fitch does not rate Hypo Alpe. KEY RATING DRIVERS According to the notes' documentation, the Republic of Austria guarantees the note holders the "due and punctual" payment of all obligations payable by Hypo Alpe under the subordinated notes. The guarantee for the notes has been issued under Austria's 2008 Financial Markets Stability Act (Finanzmarktstabilitatsgesetz - FinStaG). Under the FinStaG, Austria can provide capital and funding support to Austrian banks up to a limit of EUR15bn. As of end-1Q13, EUR13.7bn of this limit had been utilised. The notes currently qualify as Lower Tier 2 capital under the Austrian Banking Act and Hypo Alpe expects the notes to qualify as Tier 2 capital under the Basel III implementation in the European Union. In Fitch's opinion, the creditworthiness of the notes would remain unaffected by regulatory changes such as the introduction of the European Commission Crisis Management Directive and other resolution measures. According to the guarantee, should the notes - due to regulatory or other developments including statutory loss absorption - bear losses such as a write-down, conversion into equity or any other resolution measure, then the guarantor would guarantee continued and punctual payment of the originally guaranteed payment amount according to the interest and principal payment schedule. RATING SENSITIVITIES The rating of the notes is sensitive to changes in Austria's sovereign rating. A downgrade of Austria's rating would lead to a downgrade of the subordinated notes. Since Fitch expects the Republic of Austria to honour the guarantee for the Tier 2 notes irrespective of the creditworthiness of Hypo Alpe, the bank's risk profile does not represent a rating sensitivity for the rating of the notes. Since late 2009 Hypo Alpe is fully owned by the Republic of Austria, which has supported the bank with sizeable capital injections and capital guarantees. For 1H13, Hypo Alpe reported a net loss and the bank received a EUR700m capital injection from the Republic of Austria in September 2013 following the conclusion of the European Commission state aid process that announced EC's approval of the orderly wind-down of Hypo Alpe. The orderly wind-down process foresees the separate sales of Hypo Alpe's Austrian (Hypo Alpe - Adria - Bank AG) and CEE subsidiaries, with the latter scheduled by 2015 at the latest. On 22 November 2013 Hypo Alpe announced that capital-strengthening measures amounting to EUR1.05bn would be implemented before year-end to meet regulatory capital and large exposure requirements. Contact: Primary Analyst Christian Kuendig Senior Director +44 20 3530 1399 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Erwin van Lumich Managing Director +34 93 323 8403 Committee Chairperson Artur Szeski Senior Director +48 22 338 6292 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: [email protected]. Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15 August 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=809526 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.