London, 17 December 2010 -- Moody's Investors Service has today taken the following rating actions
on covered bonds issued by Greek banks:
- Mortgage covered bonds issued by Alpha Bank A.E.
("Alpha") under its Direct Issuance Global Covered Bond Programme:
Baa3, placed on review for possible downgrade; previously on
23 July 2010, definitive Baa3 rating assigned (new rating);
- Mortgage covered bonds issued by EFG Eurobank Ergasias S.A.
("Eurobank EFG") under its EUR5 billion Covered Bond Programme:
Baa3, placed on review for possible downgrade; previously on
15 June 2010, downgraded to Baa3;
- Mortgage covered bonds issued by Eurobank EFG under its EUR3
billion Global Covered Bond Programme: Baa3, placed on review
for possible downgrade; previously on 15 June 2010, downgraded
to Baa3;
- Mortgage covered bonds issued by Marfin Egnatia Bank S.A.
("Marfin") under its Residential Mortgage Loan Covered Bond Programme:
A3, placed on review for possible downgrade; previously on
16 July 2010, downgraded to A3;
- Mortgage covered bonds issued by National Bank of Greece S.A.
("NBG") under its EUR10 billion Global Covered Bond Programme: Baa3,
placed on review for possible downgrade; previously on 15 June 2010,
downgraded to Baa3;
- Mortgage covered bonds issued by NBG under its EUR15 billion
Covered Bond Programme II: Baa3, placed on review for possible
downgrade; previously on 24 June 2010, definitive Baa3 rating
assigned (new rating).
The timely payment indicators (TPIs) of these covered bond programmes
are "Very Improbable".
The current ratings assigned to the existing covered bonds of the above
programmes can expected to be assigned to all subsequent covered bonds
issued under the relevant programme and any future rating actions are
expected to affect all covered bonds issued under the programme.
If there are any exceptions to this, Moody's will in each case publish
details in a separate press release.
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.
RATINGS RATIONALE
These rating actions on the covered bonds were prompted by Moody's rating
actions on the issuer ratings of several banks and on the local-
and foreign-currency government bond ratings of Greece as follows:
- Greece: Ba1, placed on review for possible downgrade
on 16 December 2010;
- Alpha: Ba1, placed on review for possible downgrade
on 17 December 2010;
- Eurobank EFG: Ba1, placed on review for possible
downgrade on 17 December 2010;
- NBG: Ba1, placed on review for possible downgrade
on 17 December 2010.
The credit strength of the issuers is a main determining factor of the
covered bond ratings. Therefore, if the issuer ratings are
under pressure, the issuers may only have a limited ability to stabilise
the covered bond ratings.
Furthermore, the review of Greece's government bond ratings
was prompted by an increased uncertainty over the economic situation within
that country. In turn, this leads to uncertainty over the
future performance of the cover-pool assets backing the relevant
covered bond programme.
In the case of Marfin, Moody's uses the rating of Marfin's
parent - Marfin Popular Bank Public Company limited (rated Baa2)
- as the "issuer rating" in its covered bond analysis.
The reason for this is that the parent provides a guarantee to Marfin's
covered bonds. Although the rating of the guarantor is not on review,
the cover pool comprises Greek loans, and therefore Moody's
has included Marfin's covered bonds in the review of the ratings
assigned to the other Greek covered bond programmes.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
an expected loss analysis and a 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 the issuer's rating of Ba1,
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 "Very Improbable" the TPI Leeway for the covered
bonds issued by Alpha, Eurobank EFG and NBG is two notches,
meaning that the issuer ratings would need to be downgraded to B1 before
the covered bonds are downgraded. For Marfin, the TPI leeway
is one notch, meaning that the guarantor rating would need to be
downgraded to Ba1 before the covered bonds are downgraded, all other
variables being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances. Some examples might be (i) a sovereign
downgrade negatively affecting both the issuer's senior unsecured rating
and the TPI; (ii) a multiple-notch downgrade of the issuer;
or (iii) a material reduction in the cover pool's value.
For further details on 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 reporting by
the issuer and are subject to change over time.
The principal methodology used for these ratings is "Moody's Rating
Approach to European 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 and 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 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.
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
Martin Rast
Vice President - Senior Analyst
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
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places several Greek covered bonds on review for possible downgrade
