Sydney, February 06, 2012 -- Moody's Investors Service has today assigned a definitive long-term
rating of Aaa to the Series 6 covered bonds issued under the US$30
billion covered bond programme of the Commonwealth Bank of Australia ("CBA"
or the "Issuer") (Aa2/Prime-1/B-). CBA issued USD
50 million floating rate Series 6 covered bonds with a 5-year hard-bullet
maturity.
The covered bonds will constitute direct, unconditional and senior
obligations of CBA, and the payments of all amounts due in respect
of the covered bonds will be unconditionally guaranteed by Perpetual Corporate
Trust Limited as trustee of CBA Covered Bond Trust. The covered
bonds will also be secured by a pool of residential mortgage loans originated
by CBA and eligible substitution assets, also known as the cover
pool.
Issuer: Commonwealth Bank of Australia
....USD 50M Series 6, Definitive Rating
Assigned Aaa
As with all covered bonds, the covered bonds will benefit from two
layers of protection by having recourse to both the issuer, CBA,
and a collateral pool. The provisional rating therefore takes into
account the following factors:
1) The credit strength of CBA, rated Aa2.
2) The value of the cover pool. The covered bonds will be primarily
backed by residential mortgage loans originated by CBA.
Other key factors:
3) The commitment of the Issuer to maintain a minimum over-collateralisation
of 5.03% which Moody's views as "committed".
4) Structure created by the transaction documents.
5) Protections provided under the Banking Amendment (Covered Bonds) Act
2011.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the covered bonds.
As of the cut-off date, the total value of the assets in
the cover pool was AUD 11,745,905,161. The cover
pool assets are mortgage loans secured by properties in Australia.
The loans have a weighted-average seasoning of 26 months and weighted-average
remaining term of 323 months. The weighted-average current
loan to value (LTV) ratio is 61.36%.
If CBA issues hard bullet covered bonds, they will benefit from
a pre-maturity test according to which CBA has to pre-fund
any covered bond maturing within 12 months of the issuer being downgraded
below Prime-1.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered Bond
Model (COBOL) which determines expected loss as a function of the issuer's
probability of default and the stressed losses on the cover pool assets
following issuer default.
The Cover Pool Losses for this programme are 22.60%.
This is an estimate of the losses Moody's currently models in the event
of issuer default. Cover Pool Losses can be split between Market
Risk of 14.63% and Collateral Risk of 7.97%.
Market Risk measures losses as a result of refinancing risk and risks
related to interest rate and currency mismatches (these losses may also
include certain legal risks). Collateral Risk measures losses resulting
directly from the credit quality of the assets in the cover pool.
Collateral Risk is derived from the Collateral Score, which for
this programme is currently 9.0%.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI)
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The number of notches by which the issuer's rating may be downgraded before
the covered bonds are downgraded under the TPI framework is measured by
the TPI Leeway. Based on the current TPI of probable the TPI Leeway
for this programme is five notches, meaning the issuer rating would
need to be downgraded to Baa1 before the covered bonds are downgraded,
all other things being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances. Some examples might be (a) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (b) a multiple notch downgrade of the issuer; or (c) a
material reduction of the value of the cover pool.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the most recent cover pool information provided by the issuer
and are subject to change over time.
RATING METHODOLOGY
The principal methodology used in this rating was Moody's Approach to
Rating Covered Bonds published in March 2010. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
The rating assigned by Moody's addresses the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
Moody's ratings are subject to revision, suspension or withdrawal
at any time at our absolute discretion. The ratings are expressions
of opinion and not recommendations to purchase, sell or hold securities.
Moody's ratings are subject to revision, suspension or withdrawal
at any time at our absolute discretion.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's Investors
Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rated entity has not informed Moody's whether the issuer is publicly
disclosing all relevant information about the product.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
Moody's did not receive or take into account a third-party assessment
on the due diligence performed regarding the underlying assets or financial
instruments in this transaction.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Jennifer Wu
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Kei Kitayama
MD - Asia-Pac Structured Fin
Structured Finance Group
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Moody's assigns definitive Aaa to Series 6 of CBA's Covered Bond Programme
