Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Land of Hesse (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer rating: S-1+/Stable) on 15 October 2024.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The AAA/Stable rating reflects the following individual credit strengths: i) sound budgetary management with recurring operating surpluses and a strong commitment to the Land’s debt brake; ii) conservative debt and liquidity management, with excellent market access and a favourable debt profile; iii) low contingent liabilities with a well-equipped pension fund for its civil servants; and iv) above-average revenue flexibility.

The rating is driven by the highly integrated German institutional framework characterised by a strong revenue equalisation system, where Hesse is a net payer among the Länder, and a strong federal solidarity principle, among other factors. This results in a close alignment of the Länder’s creditworthiness with the German federal government’s AAA/Stable ratings.

The main rating challenge is limited expenditure flexibility, coupled with spending pressures which weigh on budgetary margins over the forecast horizon.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced. The ratings could be downgraded if: i) the German sovereign rating was downgraded; ii) changes to the institutional framework were to result in notably weaker support; and/or iii) the individual credit profile deteriorated significantly and structurally.

For the latest Rating Report, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sub-Sovereigns Rating Methodology, 11 October 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Julian Zimmermann, Associate Director

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