Fitch Affirms CoBank's Ratings; Outlook Stable

2008-05-28 23:50:19 -

- Fitch has affirmed CoBank ACB's (CoBank) long-term Issuer Default Rating (IDR) and short-term IDR at 'AA-' and 'F1+', respectively. The Rating Outlook is Stable.

Fitch affirms the following:

--Long-term IDR at 'AA-';

--Short-term IDR at 'F1+';

--Subordinated debt at 'A+';

--Preferred stock at 'A';

--Support at '1';

--Support Floor at 'A-'.

CoBank's ratings reflect stable operating performance, strong asset quality and conservative capital management, with ready access to Federal Farm Credit Banks' debt which benefits from its government sponsored enterprise (GSE) status. At a time when selected agriculture sectors are challenged by high commodity prices, diversification measures taken by CoBank have largely mitigated concentration risk, a driver for its continued strong asset quality. CoBank has experienced elevated growth from higher loan demand over the last several quarters primarily due to higher prices and increased volatility in commodity markets. In response to this growth, the company issued $500 million of subordinated debt in April 2008, boosting its regulatory capital ratios. CoBank also uses participations purchased by other Farm Credit District Banks, to manage its capital for future growth.

CoBank is an Agricultural Credit Bank and is one of the five banks in the Farm Credit System (FCS; rated 'AAA/F1+' by Fitch). FCS is a GSE created by Congress in 1916 to provide a reliable source of credit and liquidity to the U.S. agricultural sector. The five Banks are jointly and severally liable for the Federal Farm Credit Banks' debt issued by the Federal Farm Credit Bank Funding Corporation as agent on their behalf. While Fitch believes it is extremely likely that CoBank would be the beneficiary of U.S. government support should it become necessary, CoBank and its debt are not guaranteed by the U.S. government.

The Stable Outlook reflects Fitch's view that CoBank is well positioned to sustain its current financial strength even in a scenario of significant stress.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 Ratings
Vincent Arscott, +1-212-908-0872
Sharon Haas, +1-212-908-0362 (New York)
Media Relations:
Kenneth Reed, +1-212-908-0540 (New York)