London, 19 April 2011 -- Moody's Investors Service has today taken rating actions on multiple covered
bonds backed by Greek residential mortgage loans:
- Covered bonds issued by Alpha Bank A.E. (Alpha)
under its Direct Issuance Covered Bond Programme (Alpha Direct Issuance
CB): Confirmed at Baa3; previously on 17 December 2010 Baa3
placed on review for possible downgrade;
- Covered bonds issued by Marfin Popular Bank Public Co.
Ltd. (MPB) under its EUR 3m Residential Mortgage Loans Covered
Bond Programme (Marfin CB): Downgraded to Baa1; previously
on 17 December 2010 A3 placed on review for possible downgrade; and
- Covered bonds issued by National Bank of Greece S.A.
(NBG) under its Covered Bond Programme II (NBG CB II): Confirmed
at Baa3; previously on 17 December 2010 Baa3 placed on review for
possible downgrade.
Today's rating actions conclude Moody's review of these programmes.
The covered bonds issued by NBG under its Global Covered Bond Programme
and by Eurobank EFG under its two covered bond programmes remain on review.
Moody's understands that the issuers are taking steps to stabilise
the ratings at their current level, and Moody's has therefore
kept the covered bonds on review until the restructurings have been completed.
The ratings assigned by Moody's address 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.
The rating assigned to the existing covered bonds is expected to be assigned
to all subsequent covered bonds issued by the issuers under these programmes
and any future rating actions are expected to affect all such covered
bonds. If there are any exceptions to this, Moody's will,
in each case, publish details in a separate press release.
RATINGS RATIONALE
The above rating actions have been prompted by rating actions on the senior
unsecured ratings of the issuers. For further details see "Moody's
downgrades the ratings of six Greek banks", 8 March 2011 and
"Moody's downgrades Marfin Popular Bank to Baa3/P-3/D-;
outlook negative (Cyprus)", 2 March 2011.
In addition, the above rating actions take into consideration the
following features of the transactions:
For Alpha Direct Issuance CB and NBG CB II, all the covered bonds
benefit from a ten-year extension period and contractual overcollateralisation
levels of 15% and 19% respectively on a nominal basis.
The TPI assigned to these transactions is Improbable.
The downgrade of Marfin's covered bonds is driven by Moody's
concerns over the future performance of the collateral. The covered
bonds are governed by Cypriot law -- as a result of the
merger of Marfin Egnatia Bank S.A. and MPB on 31 March 2011
-- and the cover pool comprises Greek residential mortgage
loans. In its press release "Moody's gives an update
on analysis of Greek structured finance transactions", 11
March 2011, Moody's stated that it expects to downgrade all
the ratings of structured debt backed by Greek collateral to levels below
A3. As a result of this, the ratings assigned to Marfin's
covered bonds are capped at Baa1. Marfin's covered bonds
benefit from overcollateralisation of 5% on a net present value
basis, as required by the Cypriot legal framework for covered bonds.
The TPI assigned to this transaction is Very Improbable.
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 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 an 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.
Based on the current TPIs in combination with the issuer ratings,
the TPI Leeway of all transactions listed above is 0 notches.
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 of the cover pool's value.
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 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.
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
Martin Rast
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 takes actions on covered bonds backed by Greek residential mortgages
