Fitch Maintains COREALCREDIT's Mortgage Pfandbriefe on Rating Watch Evolving

Thu Apr 17, 2014 10:44am EDT

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(The following statement was released by the rating agency) FRANKFURT/LONDON, April 17 (Fitch) Fitch Ratings is maintaining COREALCREDIT BANK AG's (COREALCREDIT; BBB/F2/Stable) mortgage covered bonds' (Pfandbriefe) 'AA-' rating on Rating Watch Evolving (RWE). The rating action follows the completion of the acquisition of COREALCREDIT by Aareal Bank AG ( A-/Negative/F1) and the subsequent upgrades of COREALCREDIT's Long- and Short-term Issuer Default Ratings (IDR) to 'BBB' and 'F2' respectively (see "Fitch Upgrades COREALCREDIT's IDR to 'BBB' on Acquisition By Aareal Bank" dated 9 April 2014 on www.fitchratings.com). KEY RATING DRIVERS Following the upgrade of COREALCREDIT`s IDR, the mortgage covered bonds would be eligible for an upgrade, provided the bank is committed to a level of overcollateralisation (OC) in line with the higher rating. However, the RWE is being maintained as a result of uncertainty of the relevance of COREALCREDIT's mortgage Pfandbrief programme to Aareal Bank Group's funding. In the absence of both new Pfandbrief issuance and the addition of new cover assets, the programme may be considered as dormant. For dormant programmes, Fitch would rely on a publicly committed OC or, in its absence, on the legal minimum OC. With the currently committed OC of 13%, which is equal to Fitch's breakeven OC for the existing rating, the 'AA-' rating would most likely be affirmed. An increased OC would make the programme eligible for an upgrade and a fall in the OC to the legally required minimum would trigger a downgrade. The RWE will be resolved once Fitch has received further information regarding COREALCREDIT's future loan origination and Pfandbrief issuance as well as intentions regarding OC maintenance. RATING SENSITIVITIES The 'AA-' of COREALCREDIT's mortgage covered bonds would be vulnerable to downgrade if any of the following occurs: (i) the IDR is downgraded by four or more notches to 'BB-' or lower; or (ii) the OC that Fitch considers in its analysis drops below Fitch's 'AA-' breakeven level of 13%. The Fitch breakeven OC for the covered bond rating will be affected, among others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the breakeven OC to maintain the covered bond rating cannot be assumed to remain stable over time. Contacts: Primary Analyst Tobias Bayerl Analyst +49 69 768 076 126 Fitch Deutschland GmbH Taunusanlage 17 D-60325 Frankfurt am Main Secondary Analyst Mathias Pleissner Director +49 69 768 076 133 Committee Chairperson Rebecca Holter Senior Director +49 69 768 076 261 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: christian.giesen@fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria', 10 March 2014, 'Criteria for the Analysis of Commercial Real Estate Loans Securing Covered Bonds', 14 October 2013 and 'Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress Addendum', dated 04 February 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Covered Bonds Rating Criteria - Mortgage Liquidity and Refinance Stress 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.

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