London, 25 April 2018 -- Moody's Investors Service ("Moody's") has affirmed the Aa1 ratings assigned
to the mortgage and public sector covered bonds issued by HYPO NOE Landesbank
für Niederösterreich und Wien AG (the issuer or HYPO NOE,
CR assessment unpublished).
RATINGS RATIONALE
Today's rating action follows the improved credit quality of HYPO NOE
(unpublished CR assessment). As a result, the covered bond
(CB) anchor for HYPO NOE's mortgage and public sector covered bonds
is now higher.
Under Moody's "timely payment indicator" (TPI) framework
and expected loss analysis, HYPO NOE's mortgage and public
sector covered bonds could achieve a Aaa rating. For HYPO NOE's
mortgage covered bonds, the minimum OC consistent with the Aaa rating
would be 15%. For HYPO NOE's public sector covered
bonds, the minimum OC consistent with the Aaa rating would be 22%.
However, the affirmation of the Aa1 ratings of HYPO NOE's
mortgage and public sector covered bonds incorporates Moody's expectation
of the level of over-collateralisation that the issuer will maintain
in the programmes on an ongoing basis. The rating affirmation reflects
that the expected loss of the covered bonds remains commensurate with
their current ratings.
At the request of the issuer, the CR assessment is not published.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step
process: an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL)
to determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability that the
issuer will cease making payments under the covered bonds (a CB anchor
event); and (2) the stressed losses on the cover pool assets following
a CB anchor event.
The CB anchor for both programme is the CR assessment plus 1 notch.
The CR assessment reflects an issuer's ability to avoid defaulting
on certain senior bank operating obligations and contractual commitments,
including covered bonds. Moody's may use a CB anchor of CR
assessment plus one notch in the European Union or otherwise where an
operational resolution regime is particularly likely to ensure continuity
of covered bond payments.
The cover pool losses are an estimate of the losses Moody's currently
models following a CB anchor event. Moody's splits cover
pool losses between market risk and collateral risk. Market risk
measures losses stemming from refinancing risk and risks related to interest-rate
and currency mismatches (these losses may also include certain legal risks).
Collateral risk is derived from the collateral score, which measures
losses resulting directly from the cover pool assets' credit quality.
HYPO NOE Landesbank für Niederösterreich und Wien AG -
Mortgage Covered Bonds
The cover pool losses of HYPO NOE's mortgage covered bonds are 17.8%,
with market risk of 12.9% and collateral risk of 4.9%.
The collateral score for this programme is currently 7.4%.
The over-collateralisation in this cover pool is 44.9%,
of which the issuer provides 2% on a "committed" basis.
Under Moody's COBOL model, the minimum OC consistent with
the Aa1 rating is 4.5%, of which 0% needs to
be in "committed" form to be given full value. These
numbers show that Moody's is relying on "uncommitted"
OC in its expected loss analysis.
HYPO NOE Landesbank für Niederösterreich und Wien AG -
Public-Sector Covered Bonds
The cover pool losses of HYPO NOE's public sector covered bonds
are 20.4%, with market risk of 13.3%
and collateral risk of 7.1%. The collateral score
for this programme is currently 14.3%. The over-collateralisation
in this cover pool is 37.7%, of which the issuer provides
2% on a "committed" basis. Under Moody's
COBOL model, the minimum OC consistent with the Aa1 rating is 9.5%,
of which 0% needs to be in "committed" form to be given
full value. These numbers show that Moody's is relying on
"uncommitted" OC in its expected loss analysis.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Moody's Global Covered Bonds
Monitoring Overview", published quarterly. All numbers in
this section are based on Moody's most recent modelling (based on
data, as of end of December 2017).
TPI FRAMEWORK: Moody's assigns a "timely payment indicator"
(TPI), which measures the likelihood of timely payments to covered
bondholders following a CB anchor event. The TPI framework limits
the covered bond rating to a certain number of notches above the CB anchor.
For HYPO NOE's mortgage covered bonds, Moody's has assigned
a TPI of Probable.
For HYPO NOE's public sector covered bonds, Moody's has assigned
a TPI of High.
Factors that would lead to an upgrade or downgrade of the rating(s):
The CB anchor is the main determinant of a covered bond programme's rating
robustness. A change in the level of the CB anchor could lead to
an upgrade or downgrade of the covered bonds. The TPI Leeway measures
the number of notches by which Moody's might lower the CB anchor before
the rating agency downgrades the covered bonds because of TPI framework
constraints.
The TPI Leeway for both programmes is unpublished.
A multiple-notch downgrade of the covered bonds might occur in
certain circumstances, such as (1) a country ceiling or sovereign
downgrade capping a covered bond rating or negatively affecting the CB
Anchor and the TPI; (2) a multiple-notch downgrade of the
CB Anchor; or (3) a material reduction of the value of the cover
pool.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in December 2016.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Alexander Zeidler
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
