Scope Ratings assigns a definitive credit rating of BBB (SF) to the EUR 60m credit-linked note paying 5.54% fixed coupon issued by the Herrenhausen Investment S.A. - Compartment I in May 2014. The CLN is exposed to the credit losses that may arise on a static EUR 1.29bn commercial real estate portfolio originated by Deutsche Hypothekenbank Actien-Gesellschaft. The synthetic transfer of credit risk to the CLN is achieved through a contractual agreement between Herrenhausen Investment S.A. and Deutsche Hypothekenbank. The issuance proceeds of the CLN will be deposited in a cash collateral account held by Deutsche Hypothekenbank.

Key rationale for the rating:
+ the credit quality of the underlying loan pool mostly exposed to office and retail commercial real estate, is commensurate with an average investment grade credit risk profile;
+ the structural credit enhancement, which protects the CLN against the first 1% of losses arising on the underlying pool;
+ the amortization mechanism of the transaction leading to an accelerated amortization of the CLN under certain conditions;
+ the experience of Deutsche Hypothekenbank, which acts as loan originator and servicer in the transaction, in the commercial real estate market;
- the underlying pool´s 16.1% of loans that Scope has assessed as non-investment grade credits;
- the credit risk exposure of the CLN’s full notional and coupon to Deutsche Hypothekenbank as cash collateral account provider and credit protection buyer.

Scope has performed independent credit assessments of the underlying loans in the pool and of the major counterparty, Deutsche Hypothekenbank, to incorporate all relevant transaction features in its analysis.

The entire notional of the CLN is exposed to the credit risk of Deutsche Hypothekenbank as cash collateral account provider in the transaction. The rating of the CLN is therefore linked to the credit quality of the bank. Hence, Scope has performed a credit assessment of Deutsche Hypothekenbank, which reflects the profit/loss-transfer agreement with Nord/LB, the support from major shareholders (German sub-sovereigns) and the safety net mechanisms provided by the Deutsche Sparkassen und Giroverband-Association.

Scope’s rating reflects the expected loss on the interest and principal of the rated notes by March 2052. In order to rate this transaction, Scope has applied its Structured Finance Methodology Guidelines (December 12, 2013). A detailed rating report about Herrenhausen Investment S.A. - Compartment I - Inhaberschuldverschreibung has been published by Scope and is available [LINK].

For more information, please visit Scope´s website www.scoperatings.com.

Regulatory Disclosure:

Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings GmbH, Berlin, District Court for Berlin (Charlottenburg) HRB 145472, directors: Thomas Morgenstern, Florian Schoeller.

The rating concerns a newly-issued financial instrument, which was evaluated for the first time by Scope Ratings GmbH.

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings, but for a fee based on a mandate of a third party (the originator) interested in the distribution of the capital investment.

As at the time of the analysis, neither Scope Ratings GmbH nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings GmbH or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of the rating
Legal documentation, underlying asset information and third party valuation opinions

Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating report by the rated entity prior to publication / Modification of the report after the examination

The rated entity was given the opportunity to examine the rating report prior to publication. Following that examination, the rating report was modified without impact on the rating.

Methodology
The methodology applicable for the rating of Herrenhausen Investment S.A. – Compartment I - Inhaberschuldverschreibung is the Structured Finance Instrument Methodology Guideline, which is available at www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

Conditions of use / exclusion of liability
© 2014 Scope Corporation AG and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Capital Services GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope cannot, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided “as is” without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or otherwise damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party, as opinions on relative credit risk and not as a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

Issuer
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Competent supervisory authority
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