Fitch Upgrades COREALCREDIT's Mortgage Pfandbriefe to 'AA'; Outlook Stable

Fri Aug 8, 2014 11:00am EDT

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(The following statement was released by the rating agency) FRANKFURT/LONDON, August 08 (Fitch) Fitch Ratings has upgraded COREALCREDIT BANK AG's (COREALCREDIT; BBB/F2/Stable) mortgage Pfandbriefe to 'AA' from 'AA-' and removed the rating from Watch Positive. The Outlook is Stable. KEY RATING DRIVERS The upgrade follows COREALCREDIT's announcement to withdraw its public overcollateralisation (OC) commitment, effective 8 August 2014 (see "Fitch Places COREALCREDIT's Mortgage Pfandbriefe on Rating Watch Positive" dated 10 July 2014 on www.fitchratings.com). Following the withdrawal, Fitch bases its analysis on the lowest observed OC within the past 12 months, currently 14.9%, which is above COREALCREDIT's former public OC commitment of 13.0%. The 'AA' Pfandbrief rating is based on COREALCREDIT's Long-term Issuer Default Rating (IDR) of 'BBB', an IDR uplift of '2', a Discontinuity Cap (D-Cap) of '4' (moderate risk) and the 14.9% OC that Fitch takes into account in its analysis which provides more protection than the 14.0% breakeven OC. The Stable Outlook for the covered bonds rating is primarily driven by the Stable Outlook on COREALCREDIT's IDR. RATING SENSITIVITIES The Pfandbrief rating would be vulnerable to downgrade if any of the following occurs: (i) the IDR is downgraded by three or more notches to 'BB' or below; or (ii) the sum of notches represented by the IDR uplift and the Discontinuity Cap (D-Cap) is reduced by three or more notches; or (iii) or the OC that Fitch considers in its analysis drops below Fitch's 'AA' breakeven level of 14.0%. If OC falls to 0% on a nominal, or 2% on a net present value basis, the minimum required by German Pfandbrief legislation, it would not be sufficient to allow for timely payment of the Pfandbriefe after an issuer default. As a result the Pfandbrief rating would likely be downgraded to 'A' because this level of OC would limit the covered bond rating to one-notch rating uplift for superior recovery prospects above COREALCREDIT's IDR as adjusted by the IDR uplift. The Fitch breakeven OC for the covered bond rating will be affected by, among others, 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. More details on the portfolio and Fitch's analysis are available at www.fitchratings.com. Contact: 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. Additional information is available on www.fitchratings.com. Applicable criteria, 'Covered Bonds Rating Criteria' dated 10 March 2014, 'Criteria for the Analysis of Commercial Real Estate Loans Securing Covered Bonds' dated 22 May 2014 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 Refinancing 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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