Eika covered bonds upgraded from Aa2 to Aa1 by Moody’s

Oct 24th, 2014
Moody’s upgraded Eika Boligkreditt mortgage covered bonds from Aa2 to Aa1 on Thursday of last week.
Eika Boligkreditt_200The rating agency said that the Norwegian issuer’s covered bond anchor has improved by one notch, reflecting a revised assessment by the rating agency of the debt ratio available to absorb losses in a scenario of the issuer’s resolution (the issuer’s rating is undisclosed).
It said that the reference point for determining the probability that Eika Boligkreditt will cease making payments under the covered bond programme, its “anchor”, is the senior unsecured rating plus one notch, given that the relevant debt ratio, as recently assessed by Moody’s is 5%.
Moody’s said that following the upgrade of the anchor, and given a Timely Payment Indicator (TPI) of “high”, Eika’s mortgage covered bond rating is constrained at the Aa1 rating.
The overcollateralisation (OC) consistent with the new rating is 5.5 %, up from 4%. OC as of 30 June was 11.8 %.
According to a covered bond analyst, Eika previously had the lowest rated Norwegian covered bonds by a gap of two notches.
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