Fitch Assigns BMN's EUR500m Mortgage Covered Bonds 'BBB+(EXP)' Rating; Outlook Negative

Wed Jan 15, 2014 10:32am EST

Related Topics

(The following statement was released by the rating agency) MADRID/LONDON, January 15 (Fitch) Fitch Ratings has assigned Banco Mare Nostrum's (BMN, BB+/Negative/B) new issuance of EUR500m mortgage covered bonds (Cedulas Hipotecarias or CH) a 'BBB+(EXP)' expected rating with a Negative Outlook. KEY RATING DRIVERS The EUR500m CH new issuance replaces EUR500m CH following early amortisation in November 2013. Outstanding CHs after the new issuance's expected settlement date (21 January 2014) will increase to EUR12.0bn (from EUR11.5bn), which will be secured over the bank's total mortgage book of about EUR20.5bn resulting in nominal overcollateralisation (OC) of 71%. This compares with BMN's public minimum OC commitment of 67% to which the agency gives credit in its analysis. The expected rating assigned to the new CH issuance is based on BMN's Long-term Issuer Default Rating (IDR), a Discontinuity-Cap (D-Cap) of 1 (very high discontinuity risk), and our assessment of recoveries. It also reflects that the relied upon OC for the entity's CH programme, 67%, is greater than the programme's break-even OC of 44% commensurate with a 'BBB+' rating scenario. In our opinion, this 44% OC would provide for outstanding recoveries in excess of 91% to CH investors under a 'BBB+' stress following an assumed CH default. The Negative Outlook on the programme's rating is driven by the Outlook on BMN's IDR. RATING SENSITIVITIES A downgrade of BMN's IDRs by two notches or more to 'BB-' would result in a downgrade of the CH programme. Moreover, the rating is vulnerable to downgrade if the programme's relied upon OC dropped below the break-even OC ratio of 44%. If OC fell to the legal minimum (25%), negative rating migration of one notch would potentially apply. Contacts: Primary Analyst Antonio Casado Associate Director +34 91 702 57 76 Fitch Ratings Espana S.A 28004 Madrid Secondary Analyst Carlos Masip Director +34 91 702 57 73 Committee Chair Juan David Garcia Senior Director +34 91 702 57 74 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', dated 4 September 2013, 'EMEA Residential Mortgage Loss Criteria' dated 6 June 2013, 'EMEA Criteria Addendum - Spain - Amended, dated 20 March 2013, 'Criteria for Rating Granular Corporate Balance- Sheet Securitisations (SME CLOs)', dated 28 March 2013 and 'Covered Bonds Rating Criteria - Mortgage Liquidity & Refinancing Stress Addendum', dated 3 June 2013are available on www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here EMEA Residential Mortgage Loss Criteria here EMEA Criteria Addendum - Spain - Amended here Criteria for Rating Granular Corporate Balance-Sheet Securitisations (SME CLOs) here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum here Covered Bonds Rating Criteria - Public Sector Liquidity and Spread Assumption Addendum here Criteria for the Analysis of Commercial Real Estate Loans Securing Covered Bonds here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.