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I AGREE
16 Oct 2014
London, 16 October 2014 -- Moody's Investors Service has today upgraded to Aa1 from Aa2 the mortgage
covered bonds issued by Eika Boligkreditt AS (Eika, Privately Monitored
Rating), following the improvement of its covered bond (CB) anchor
by one notch.
RATINGS RATIONALE
Today's rating action reflects Moody's revised assessment of the debt
ratio available to absorb losses in a scenario of issuer's resolution.
Moody's reference point for determining the probability that Eika will
cease making payments under the covered bond programme, the covered
bond (CB) anchor, is SUR plus 1 notch, given that Eika's debt
ratio is now above 5%, as recently assessed by Moody's.
Following the upgrade of the CB anchor and the timely payment indicator
(TPI) assigned to this transaction at "High", Moody's TPI framework
constrains the ratings of Eika's mortgage covered bonds at Aa1.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process;
an expected loss analysis and a TPI (timely payment indicator) 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 (a CB anchor event);
and (2) the stressed losses on the cover pool assets following issuer
default.
The cover pool losses for each programme is an estimate of the losses
Moody's currently models if a CB anchor event occurs. Moody's splits
cover pool losses between market risks and collateral risks. Market
risks measure losses stemming from refinancing risks and risks related
to interest rate and currency mismatches (these losses may also include
certain legal risks). Collateral risks measure losses resulting
directly from cover pool assets' credit quality. Moody's derives
the collateral risk from the collateral score.
The cover pool losses for this programme stand at 10.1%,
with market risk of 6.7% and collateral risk of 3.4%.
The collateral score is 5.0%. The over-collateralisation
(OC) in the cover pool is 11.8%, of which 5%
is on a committed basis. The minimum OC level that is consistent
with the Aa1 rating target is 5.5%. These numbers
demonstrate that Moody's relies on uncommitted OC in its expected loss
analysis.
All numbers in this section derive from Moody's most recent modelling,
based on data, as per 30 June 2014. For further details on
cover pool losses, collateral risk, market risk, collateral
score and TPI Leeway across all covered bond programmes rated by Moody's
please refer to "Moody's EMEA Covered Bonds Monitoring Overview",
published quarterly.
TPI FRAMEWORK: Moody's assigns a TPI, which indicates the
likelihood that the issuer will make timely payments to covered bondholders
in the event of an issuer default. The TPI framework limits the
covered bond rating to a certain number of notches above the CB anchor.
For this programme, Moody's has assigned a TPI of "High".
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The CB anchor is the main determinant of a covered bond program's rating
robustness. 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.
Based on the current TPI of "High", the TPI Leeway for this programme
is zero notch. This implies that if Moody's downgrades the issuer
rating by one notch, the rating agency might also downgrade the
covered bonds because of a TPI cap, all other variables being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances, such as (1) a sovereign downgrade negatively
affecting both the CB anchor and the TPI; (2) a multiple-notch
lowering of the CB anchor; or (3) a material reduction of the value
of the cover pool.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's Approach to
Rating Covered Bonds", published in March 2014. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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
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rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
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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
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have affected the rating. For further information please see the
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associated regulatory disclosures will be those of the guarantor entity.
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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.
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.
Alix Faure
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
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:
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades ratings on Eika's covered bonds to Aa1 from Aa2.
No Related Data.
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