PLN 7.3 billion of notes affected
Frankfurt am Main, May 27, 2019 -- Moody's Investors Service ("Moody's") has today assigned Aa3 definitive
ratings to the mortgage covered bonds issued by mBank Hipoteczny S.A.
(the issuer, issuer rating Baa2, stable; counterparty
risk (CR) assessment A3(cr)) which are governed by the Polish legal framework
for covered bonds.
RATINGS RATIONALE
A covered bond benefits from (1) the issuer's promise to pay interest
and principal on the bonds; and (2) following a CB anchor event,
the economic benefit of a collateral pool (the cover pool). The
ratings therefore reflect the following factors:
(1) The credit strength of mBank Hipoteczny S.A. (A3(cr))
and a CB anchor of CR assessment plus 1 notch.
(2) Following a CB anchor event the value of the cover pool. The
stressed level of losses on the cover pool assets following a CB anchor
event (cover pool losses) for this transaction is 27.9%.
Moody's considered the following factors in its analysis of the
cover pool's value:
a) The credit quality of the assets backing the covered bonds.
The mortgage covered bonds are backed by Polish residential and commercial
mortgage loans. The collateral score for the cover pool is 22.0%.
b) The legal framework. Notable aspects of the Polish legal framework
include a minimum statutory nominal over-collateralisation (OC)
of 10% and a maturity extension feature of the covered bonds that
reduces refinancing risk.
c) The exposure to market risk, which is 13.2% for
this cover pool.
d) The over-collateralisation (OC) in the cover pool is 33.9%,
of which mBank Hipoteczny S.A. provides 10% on a
"committed" basis (see Key Rating Assumptions/Factors,
below).
The TPI assigned to this transaction is Probable. Moody's
TPI framework does not constrain the rating.
The ratings of the covered bonds are constraint at the Aa3 level by the
local and foreign currency bond ceiliings for Poland.
At present, the total value of the assets included in the cover
pool is equivalent to approximately PLN 9.7 billion, comprising
21,083 residential mortgage loans, 308 commercial mortgage
loans and substitute assets. The residential mortgage loans represent
56% of the aggregate loan amount of the mortgage loans in the cover
pool and have a weighted-average (WA) seasoning of 34 months and
a WA loan-to-value (LTV) ratio of 78%. The
commercial mortgage loans represent 44% of the total mortgage loans
in the cover pool and have a WA seasoning of 49 months and a WA LTV ratio
of 68%. While all residential mortgage loans are denominated
in PLN, about 77% of the commercial mortgage loans are denominated
in EUR and less than 1% is denominated in USD.
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 this programme is CR assessment plus 1 notch.
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 for mBank Hipoteczny S.A. -
Mortgage Covered Bonds are 27.9%. This is an estimate
of the losses Moody's currently models following a CB anchor event.
Moody's splits cover pool losses between market risk of 13.2%
and collateral risk of 14.7%. 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 measures losses resulting directly from cover pool assets'
credit quality. Moody's derives collateral risk from the
collateral score, which for this programme is currently 22.0%.
The over-collateralisation in the cover pool is 33.9%,
of which the issuer provides 10% on a "committed" basis.
Under Moody's COBOL model, the minimum OC consistent with
the Aa3 rating is 0%, of which 0% needs to be in "committed"
form to be given full value. These numbers show that Moody's
is not 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 "Covered Bonds Sector Update",
published quarterly. All numbers in this section are based on Moody's
most recent modelling (based on data as of 31 March 2019).
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 mBank Hipoteczny S.A. - Mortgage Covered Bonds,
Moody's has assigned a TPI of Probable.
Factors that would lead to an upgrade or downgrade of the ratings:
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.
Based on the current TPI of "Probable", the TPI Leeway
for this programme is 3 notches. This implies that Moody's
might downgrade the covered bonds because of a TPI cap if it lowers the
CB anchor by 4 notches all other variables being equal.
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 this rating was "Moody's
Approach to Rating Covered Bonds" published in February 2019.
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.
Martin Lenhard
VP - Senior Credit Officer
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Jose de Leon
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
