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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

Moody's upgrades ratings on Eika's covered bonds to Aa1 from Aa2.

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 rating practices. For ratings issued on a support provider, this announcement provides certain 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 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 rating action, and whose ratings may change as a result of this 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.

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:
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 upgrades ratings on Eika's covered bonds to Aa1 from Aa2.
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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