NOTE: On September 28, 2021, the press release was corrected as follows: In the List of Affected Ratings accessible via hyperlink from this press release, Series 14 (ISIN: PTCGHOOE0013) for Caixa Geral de Depositos S.A. - Mortgage Covered Bonds was removed. Revised release follows.
Madrid, September 21, 2021 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
the covered bonds issued under five Portuguese programmes and placed others
issued under one programme on review for upgrade.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL454743
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Today's rating actions on various Portuguese covered bond programmes follow
Moody's upgrade of the Government of Portugal's local-currency
bond ceiling to Aa2 from Aa3, which in turn follows Moody's
upgrade of Portugal's sovereign rating to Baa2 with a stable outlook from
Baa3 on 17 September 2021. Portuguese covered bond ratings are
capped at Portugal's local currency bond ceiling; consequently,
the upgrade of the ceiling to Aa2 has resulted in upgrades for certain
covered bond ratings.
For more details on the rationale for the sovereign rating change,
please refer to the press release: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_452364.
Following the upgrade of Portugal's sovereign rating, the Counterparty
Risk (CR) Assessments of two covered bond issuers were upgraded.
For more details on the rationale for the bank rating upgrades,
please refer to the press release: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_454388.
Furthermore, Moody's has lowered its refinancing margins for
all Portuguese covered bonds and raised its TPI for Caixa Economica Montepio
Geral - Mortgage Covered Bonds (CPT) to Very-High from high.
These adjustments are supported by a combination of factors that have
lowered refinancing risk for Portuguese covered bond programmes,
including: (i) the improvement of the Portuguese economy as reflected
in the upgrade of the Portugal's rating to Baa2 from Baa3, (ii)
the significant reduction of covered bond market spreads in Portugal over
the last years, (iii) and the near term implementation of the EU
directive on covered bonds, which will reinforce strengths of the
Portuguese covered bond law and the systemic importance of Portuguese
covered bonds.
For Banco BPI S.A. - Mortgage Covered Bonds,
Banco Santander Totta S.A. - Mortgage Covered Bonds,
Banco Comercial Portugues S.A. - Mortgage Covered
Bonds, and Caixa Geral de Depositos S.A. -
Mortgage Covered Bonds, the country ceiling constrains the ratings
at Aa2.
Following the upgrade of Banco BPI S.A. to Baa1(cr) from Baa2(cr),
Moody's has placed the A1 rating of Banco BPI S.A. -
Public Sector Covered Bonds on review for upgrade, reflecting the
potential rating upgrade if the issuer maintains an OC level in the programme
consistent with a higher rating. During the review process,
Moody's will assess the willingness and capacity of the issuer to maintain
sufficient OC on a sustained basis. The highest rating now achievable
is the country ceiling of Aa2.
For Caixa Economica Montepio Geral - Mortgage Covered Bonds (CPT),
the TPI of Very- High constrains the rating of the covered bonds
at Aa3.
All upgraded covered bond ratings benefit from OC consistent with their
new rating levels.
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 (such cessation,
a CB anchor event); and (2) the estimated losses that will accrue
to covered bondholders should a CB anchor event occur. We express
the probability of a CB anchor event as a point on our alpha-numeric
rating scale (i.e. the CB anchor), which is typically
one notch higher than the issuer's CR assessment.
The cover pool losses are an estimate of the losses Moody's currently
models following a CB anchor event. Moody's splits cover
pool losses between market risk and collateral risk. 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 is derived from the collateral score, which measures
losses resulting directly from the cover pool assets' credit quality.
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.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator"
(TPI), which is our assessment of the likelihood of timely payment
of interest and principal to covered bondholders following a CB anchor
event. TPIs are assessed as Very High, High, Probable-High,
Probable, Improbable or Very Improbable. The TPI framework
limits the covered bond rating to a certain number of notches above the
CB anchor.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in September 2021 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1284753.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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.
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.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are all solicited credit
ratings. Additionally, the List of Affected Credit Ratings
includes additional disclosures that vary with regard to some of the ratings.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL454743
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Disclosure to Rated Entity
• Endorsement
• Lead Analyst
• Releasing Office
• CR ASSESSMENT
• CB ANCHOR
• Cover Pool Losses
• Collateral Risk
• Market Risk
• Collateral Score
• TPI
• TPI Leeway
• Minimum % consistent with rating
• Current OC
• Current Committed OC
• Uncommitted OC relied on?
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Miguel Lopez Patron
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454