PRESS RELEASE: S&P Affirms Ratings On 2 Covered Bond Programs (June 8, 2010)

8th Jun 2010 17:57

The following is a press release from Standard & Poor's: OVERVIEW -- Today's rating actions follow the application of our revised criteria for assessing asset-liability mismatch risk in covered bonds. -- We have affirmed and removed from CreditWatch negative our 'AAA' ratings on Spain-based Barclays Bank S.A. and Eurohypo AG's mortgage covered bonds. -- We have assigned stable outlooks to the ratings on the covered bonds mentioned in this release. MADRID (Standard & Poor's) June 8, 2010--Standard & Poor's Ratings Services today affirmed and removed from CreditWatch negative its 'AAA' credit ratings on Spain-based Barclays Bank S.A.'s (Barclays) mortgage covered bonds ("cedulas hipotecarias") and Eurohypo AG's (Eurohypo) mortgage covered bonds ("Hypothekenpfandbriefe"). Additionally, we have assigned a stable outlook to Barclays' and Eurohypo's mortgage covered bonds (see ratings list below). Today's affirmations follow the application of our updated covered bond criteria (see "Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds," published Dec. 16, 2009). Our rating actions follow a review of the most recent asset and cash flow information provided to us, as well as discussions with the issuers to understand their planned issuance profile and expected levels of credit enhancement. Following the application of our five-step criteria process, we have assessed the current asset-liability mismatch (ALMM) risk, the programs' categorization, the maximum potential covered bond ratings uplift, the cash flow and market value risk, and the credit enhancement provided. BARCLAYS BANK S.A.'S MORTGAGE COVERED BONDS We have applied our updated covered bond criteria to the latest asset and cash flow information we have received on Barclays' Spanish legislation-enabled covered bonds. The Spanish Mortgage Law 41/2007 stipulates a minimum overcollateralization level of 125% of eligible cover assets against outstanding mortgage covered bonds, or cedulas hipotecarias. However, should Barclays become insolvent, the cedulas hipotecarias have full recourse to the bank's whole mortgage book on which we have based our asset and cash flow analysis. For these covered bonds we have calculated a program categorization of "1" and an ALMM of "Low," which we believe are commensurate with a 'AAA' rating. The stable outlook reflects that, under our criteria, the covered bond ratings could be elevated up to seven notches above Barclays' (AA-/Negative/A-1+) issuer credit rating. For this reason, we believe that neither a moderate change to Barclays' issuer credit rating nor a change to the ALMM would automatically trigger a covered bond rating action. EUROHYPO AG'S MORTGAGE COVERED BONDS We believe that the overcollateralization that Eurohypo provides to its mortgage covered bonds is consistent with a 'AAA' rating. For these covered bonds we have calculated a program categorization of "1" and an ALMM of "Low." These characteristics allow for a maximum seven-notch elevation of the covered bond rating above Eurohypo's issuer credit rating (A-/Negative/ A-2). We have assigned a stable outlook to the mortgage covered bonds, as the 'AAA' rating on the bonds is less than seven notches above Eurohypo's rating. Therefore, a potential downgrade of Eurohypo or a change to the ALMM measure would not automatically lead to a change in the rating on the covered bonds, all else being equal. For program-specific details on these factors, see "Global Covered Bond Characteristics And Rating Summary," published June 8, 2010, to include the programs listed below. CREDITWATCH RESOLUTIONS We will generally aim to resolve the remaining covered bond CreditWatch placements within 10 business days of receiving final credit and cash flow information, and after discussions with issuers to understand their planned issuance profile and expected levels of credit enhancement. We will likely publish our CreditWatch resolutions and assignment of outlooks weekly. RELATED CRITERIA AND RESEARCH -- Global Covered Bond Characteristics And Rating Summary, June 8, 2010 -- Credit FAQ: Standard & Poor's Explains Update To Criteria For Assessing Asset-Liability Mismatch Risk In Covered Bonds, Dec. 17, 2009 -- Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds, Dec. 16, 2009 Related articles are available on RatingsDirect. Criteria, presales, servicer evaluations, and ratings information can also be found on Standard & Poor's Web site at www.standardandpoors.com. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4011. RATINGS LIST Rating Program/ To From Country: Covered bond type RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE; OUTLOOK ASSIGNED Barclays Bank S.A. AAA/Stable AAA/Watch Neg Spain: Cedulas Hipotecarias Eurohypo AG AAA/Stable AAA/Watch Neg Germany: Hypothekenpfandbriefe Surveillance Credit Analysts: Ana Galdo, Madrid (34) 1-308-6947; [email protected] Sabine Daehn, Frankfurt (49) 69-33-999-303; [email protected] Secondary Credit Analyst: Karlo Fuchs, Frankfurt (49) 69-33-999-156; [email protected] Additional Contact: Covered Bonds Surveillance; [email protected] No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. 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