London, 10 December 2012 -- Moody's Investors Service has today placed on review for downgrade the
Aa3 rating assigned to the covered bonds of SpareBank 1 Naeringskreditt
AS. At the same time, Moody's has affirmed the Aaa
ratings of the covered bonds issued by SpareBank 1 Boligkreditt AS and
More Boligkreditt. Today's rating announcements are prompted
by Moody's actions on the issuers.
RATINGS RATIONALE
On 6 December 2012, Moody's took rating actions on five Norwegian
saving banks. Specifically, Moody's will review for
possible downgrade the long-term senior debt and deposit ratings
of the four rated banks in the SpareBank 1 alliance (SpareBank 1 SMN,
SpareBank 1 SR-Bank, SpareBank 1 Nord-Norge and Sparebanken
Hedmark). Moody's expects that the banks' debt ratings
may be lowered by up to one notch. For further details, please
refer to the press release "Moody's concludes the review on the ratings
of five Norwegian savings banks".
A downgrade of any of the four member banks of the SpareBank 1 alliance
would negatively impact the credit strength of SpareBank 1 Naeringskreditt
AS, the covered bond issuer, to which Moody's has assigned
a private monitored rating. The Timely Payment Indicator (TPI)
assigned to these bonds backed by commercial property financings is "Probable"
and Moody's TPI framework would constrain the covered bond ratings
to A1 in case the issuer rating is downgraded.
Moody's has affirmed the Aaa ratings of the residential covered
bonds issued by SpareBank 1 Boligkreditt AS and More Boligkreditt,
because in both cases the TPI framework (TPI: "High")
does not constrain the covered bond ratings. Moody's expects
that the issuers will provide OC in committed form, in due course.
The ratings assigned by Moody's address the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transactions.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
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 (1) a function
of the issuer's probability of default (measured by the issuer's rating);
and (2) the stressed losses on the cover pool assets following issuer
default.
COVER POOL LOSSES AND OVER-COLLATERALISATION
For each covered bond programme below, the cover pool losses are
an estimate of the losses Moody's currently models if the relevant issuer
defaults. Cover pool losses can be split between market risk and
collateral risk. 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.
--- SpareBank 1 Naeringskreditt AS covered bonds
The cover pool losses are 30.6%, with market risk
of 19.1% and collateral risk of 11.5%.
The collateral score for this programme is currently 17.1%.
The over-collateralisation (OC) in this cover pool is 29.8%,
of which the issuer currently provides 15.5% on a "committed"
basis. The minimum OC level that is consistent with the Aa3 covered
bond rating target is 19.5%. Moody's will determine
the amount of committed OC as part of its rating review.
--- SpareBank 1 Boligkreditt AS covered bonds
The cover pool losses are 10.9%, with market risk
of 7.6% and collateral risk of 3.4%.
The collateral score for this programme is currently 5.0%.
The OC in this cover pool is 9.3%, of which the issuer
currently provides 0.0% on a "committed" basis.
The minimum OC level that is consistent with the Aaa covered bond rating
target is 8.5%. Moody's expects that the issuer
will provide 9.5% OC in committed form, in due course.
--- More Boligkreditt covered bonds
The cover pool losses are 10.0%, with market risk
of 5.9% and collateral risk of 4.1%.
The collateral score for this programme is currently 6.1%.
The OC in this cover pool is 13.5%, of which the issuer
currently provides 0.0% on a "committed" basis.
The minimum OC level that is consistent with the Aaa covered bond rating
target is 7.5%. Moody's expects that the issuer
will provide 8.5% OC in committed form, in due course.
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 EMEA Covered Bonds
Monitoring Overview", published quarterly. All numbers in
this section are based on the most recent Performance Overviews,
which are based on Moody's most recent modelling based on data,
as of 30 September 2012.
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 issuer's
credit strength. The TPI Leeway measures the number of notches
by which the issuer's rating may be downgraded before the covered bonds
are downgraded under the TPI framework.
--- SpareBank 1 Naeringskreditt AS covered bonds
The TPI assigned to this programme is "Probable", the
TPI Leeway is unpublished.
--- SpareBank 1 Boligkreditt AS covered bonds
The TPI assigned to this programme is "High", the TPI
Leeway is one notch.
--- More Boligkreditt covered bonds
The TPI assigned to this programme is "High", the TPI
Leeway is one notch.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (2) a multiple-notch downgrade of the issuer; or
(3) a material reduction of the value of the cover pool.
On 21 August 2012, Moody's released a Request for Comment seeking
market feedback on proposed adjustments to its modelling assumptions.
These adjustments are designed to account for the impact of rapid and
significant country credit deterioration on structured finance transactions.
If the adjusted approach is implemented as proposed, the rating
of the notes affected by today rating action may be negatively affected.
See "Approach to Assessing the Impact of a Rapid Country Credit Deterioration
on Structured Finance Transactions", (http://www.moodys.com/research/Approach-to-Assessing-the-Impact-of-a-Rapid-Country-Credit--PBS_SF294880)
for further details regarding the implications of the proposed methodology
changes on Moody's ratings.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating Covered Bonds" published in July 2012. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings 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 considers the quality of information available on the rated entities,
obligations or credits satisfactory for the purposes of issuing this review.
Moody's adopts all necessary measures so that the information it uses
in assigning the ratings 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 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.
Alexander Zeidler
Vice President - Senior Analyst
Structured Finance Group
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
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews SpareBank 1 Naeringskreditt's covered bonds for downgrade; affirms covered bonds of SpareBank 1 Boligkreditt and More Boligkreditt
