London, 31 August 2010 -- Substitute the reference to "Aa3" in the paragraph beginning "Expected
Loss: Moody's determines a rating based...."
with a reference to "A2". Revised release follows.
Moody's Investors Service has assigned a definitive long-term rating
to the following series of covered bonds issued by Swedbank Mortgage AB
(the issuer) under its covered bond programme:
EUR 70m Covered Bonds due 2013 (Series 861): Aaa; new rating
SEK 500m Covered Bonds due 2012 (Series 862): Aaa; new rating
SEK 450m Covered Bonds due 2014 (Series 863): Aaa; new rating
SEK 500m Covered Bonds due 2012 (Series 864): Aaa; new rating
RATINGS RATIONALE
The covered bonds constitute direct, unconditional and senior obligations
of Swedbank Mortgage AB and are secured by a pool of Swedish primarily
(76%) residential mortgage loans (the cover pool).
The rating takes into account the following factors:
(1) The credit strength of the issuer (A2).
(2) The strengths of the Swedish legal framework for covered bonds.
(3) The credit quality of the assets (the cover pool) securing the payment
obligations of the issuer under the covered bonds. The majority
(currently 76%) of the loans in the cover pool are backed by Swedish
residential properties originated by the issuer's group. The remainder
are commercial, public sector and forest and agriculture assets.
(4) Minimum over-collateralisation of 14% maintained on
an "uncommitted" basis. The current over-collateralisation
is 21.2%.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the covered bonds.
The ratings assigned by Moody's address 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.
The Aaa rating assigned to the existing covered bonds is expected to be
assigned to all subsequent covered bonds issued by the issuer under this
programme and any future rating actions are expected to affect all such
covered bonds. Should there be any exceptions to this, Moody's
will in each case publish details in a separate press release.
The principal methodology used in rating covered bonds issued by Swedbank
Mortgage AB is "Moody's Rating Approach to European Covered Bonds" published
in March 2010. Other methodologies and factors that may have been
considered in the rating process can also be found on Moody's website.
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, measured by its rating of A2, and
the stressed losses on the cover pool assets following issuer default.
The Cover Pool Losses for this programme are 18.2%.
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 13.3% and Collateral Risk of 4.8%.
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 7.2%.
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 one notch, 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. All figures
given above are based on the most recent Performance Overview published
by Moody's and are subject to change over time.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's Analytics'
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit or validate
information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Madrid
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Jane Soldera
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
Correction to Text, Aug. 27 2010 Release: Moody's assigns definitive rating to covered bonds issued by Swedbank Mortgage AB
