London, 29 March 2011 -- Moody's Investors Service has assigned a provisional long term rating
of (P)Aaa to the following series of covered bonds issued by Deutsche
Bank AG under the German Pfandbrief Act:
- Series 2, EUR 1 billion Mortgage Pfandbrief: (P)Aaa
RATINGS RATIONALE
As with all covered bonds, the covered bonds benefit from two layers
of protection by having recourse to both the issuer and a collateral pool.
The rating therefore takes into account the following factors:
1) The credit strength of the issuer, rated Aa3.
2) The value of the cover pool. The mortgage covered bonds are
backed by residential and commercial mortgage loans.
Other key factors:
3) The issuer maintaining, on an "uncommitted" basis,
minimum over-collateralisation consistent with the covered bond
rating. The current provisional minimum is 25%, while
the minimum required under the law is 2%. These figures
apply on a NPV basis.
4) The German legal framework for covered bonds, as the covered
bonds are governed by the Pfandbrief Act.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable"
to the covered bonds.
The provisional 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 issues provisional ratings in advance of the final sale
of securities and these ratings only represent Moody's preliminary
opinion. Upon a conclusive review of the transaction and associated
documentation Moody's will endeavour to assign a definitive rating
to the covered bonds.
Assuming assignment of a definitive Aaa rating upon issuance of Series
2, all subsequent covered bonds issued by the issuer under this
programme would be expected to be assigned a Aaa rating. Consequently,
any subsequent future rating actions in relation to the issuer's
covered bonds 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.
A copy of Moody's Pre Sale Report for this transaction is available
on our website www.moodys.com. Alternatively please
call Moody's Client Service Desk on +44 (0)20 7772 5454.
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
Aa3, and the stressed losses on the cover pool assets following
issuer default.
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 3 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.
RATING METHODOLOGY
The principal methodology used in rating the issuer's covered bonds
is Moody's Rating Approach to Covered Bonds published in March 2010.
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 information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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 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 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.
London
Volker Gulde
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional rating to covered bonds issued by Deutsche Bank AG
