(Repeat for additional subscribers)
Jan 3 (The following statement was released by the rating agency)
Fitch Ratings has placed COREALCREDIT BANK AG's (COREALCREDIT; BBB-/F3/RWP)
mortgage Pfandbriefe 'AA-' rating on Rating Watch Evolving (RWE).
The rating action follows the planned acquisition of COREALCREDIT by Aareal Bank
AG (ARB; A-/Stable/F1) and the subsequent placement of COREALCREDIT's 'BBB-'
Long-term Issuer Default Rating (IDR) on Rating Watch Positive (RWP; see "Fitch
Affirms Aareal and Places COREALCREDIT on Positive Watch on Announced
Acquisition" dated 27 December 2013 on www.fitchratings.com).
KEY RATING DRIVERS
The RWE reflects the likelihood of a rating change as a result of the announced
take-over, and is dependent on strategic decisions regarding COREALCREDIT's
future covered bonds business. If COREALCREDIT's IDR is upgraded following the
completion of the transaction, its mortgage covered bonds would be eligible for
an upgrade, provided the bank committed to maintain a percentage of
overcollateralisation (OC) in line with a higher rating. If the existing public
commitment of 13% was maintained, the current 'AA-' mortgage Pfandbriefe rating
would most likely be affirmed. If the bank decided to remove its existing public
OC commitment, the mortgage Pfandbriefe rating would be downgraded.
ARB is an active Pfandbrief issuer, but at this stage, Fitch assumes that
COREALCREDIT's and ARB's cover pools will not be merged in the short term. If
the agency considers COREALCREDIT's mortgage Pfandbrief programme to be dormant,
we would rely in our analysis on a public commitment regarding the maintenance
of OC, or in its absence, on the legally required minimum. COREALCREDIT's public
commitment of 13% can be changed with four weeks' notice. Under German law, the
mandatory OC for Pfandbriefe is at least 2% on a stressed net present value
basis and 0% on a nominal basis.
The RWE will be resolved following the resolution of the RWP on COREALCREDIT's
IDR and based on further information regarding COREALCREDIT's future mortgage
loan origination and Pfandbriefe issuance plan as well as its intentions for
maintenance of OC. According to current plans, the transaction, which is subject
to the approval of the respective authorities, will be completed during 1H14.
As of 30 September 2013, COREALCREDIT's EUR2.6bn outstanding mortgage
Pfandbriefe were secured by a cover pool of EUR3.1bn, resulting in nominal OC of
COREALCREDIT's mortgage Pfandbriefe could be upgraded by one notch to 'AA' if
the bank's IDR was upgraded by one notch to 'BBB' (in line with ARB's Viability
Rating of 'bbb') and if the Pfandbriefe were protected by a publicly committed
OC corresponding to a 'AA' rating.
If Fitch only credited the legal minimum OC, as required by German Pfandbrief
legislation, COREALCREDIT's mortgage Pfandbriefe would be downgraded to one or
two notches above the bank's IDR.