Covered Bond Roundup - Week Ending February 26

Barclay's and Banco Populare launch jumbos ... Fitch downgrades three Greek mortgage covered bonds ... concerns raised about German public sector covered bonds ... and more.

Some items of covered bond news do not rate their own story in this publication — often because they relate to geographic areas outside our focus, North America.  Even so, readers who want to keep up with covered bond news in general might find them interesting.

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EUROPE (in general)

• Izabella Kaminski at FT Alphaville (Feb. 23) posted an item on a report in The Cover to the effect that "the European Central Bank may soon begin lending out the covered bonds it purchased under its €60 [billion] programme to help secondary market liquidity."

• Fitch Ratings (Feb. 23) published a new criteria report detailing its rating methodology for assessing credit risk in EMEA (Europe, Middle East, Asia) residential mortgage loans. The new master-criteria report replaces the country-specific criteria reports previously in use in EMEA.  Fitch stated that the published criteria assumptions will be used for rating new RMBS transactions and covered bond programmes and for maintaining covered bond ratings.  Simultaneously, Fitch published separate country-specific criteria addendums containing specific assumptions for a number of countries.

FRANCE

Caisse de Refinancement de l'Habitat (CRH) (Feb. 24) announced that it was tapping an existing covered bond issue of €3.145 billion (due October 2014), with guidance at around 25 basis points over mid-swaps.

GERMANY

• Two posts by Tracy Alloway for FT Alphaville raise concerns about public-sector German Pfandbriefe (legislative covered bonds):

"Peripheral Pfandbriefe" (Feb. 23) includes a chart showing the exposure of public sector Pfandbriefe resulting from assets located in so-called "peripheral" European countries "like Greece, Spain and Portugal" - an average of 10 percent overall.  (However, the post acknowledges that, while expressing a number of concerns, Barclays Capital has stated that "we would not be too bearish on the performance of outstanding public sector Pfandbriefe."

"Profiteering Pfandbriefe?" (Feb. 22) includes a chart showing "the ratings distribution for assets in public sector covered bond pools, for German and non-German issuers, in 2008 and 2007." 

• Reuters (Feb. 26) quoted a spokesman for Hypo Real Estate as saying: "We are pursuing a client-oriented strategy in public sector finance with a focus on core markets Germany, France, Spain and Italy."

GREECE

• Fitch Ratings (Feb. 23) downgraded the following mortgage covered bonds issued by the National Bank of Greece (NBG), Alpha Covered Bonds Plc and Marfin Egnatia Bank: (1) NBG's mortgage covered bonds: downgraded to 'AA' from 'AAA' and remains on Rating Watch Negative (RWN); (2) Alpha Covered Bonds Plc's mortgage covered bonds: downgraded to 'AA+' from 'AAA' and remains on RWN; (3) Marfin Egnatia Bank's mortgage covered bonds: downgraded to 'AA+' from 'AAA' and remains on RWN.  According to Fitch, the three covered bond programs represent €6.5 billion of rated debt.

• Fitch Ratings (Feb. 25) updated its rating methodology for assessing credit risk in Greek prime residential mortgage loan pools that are used as collateral for structured finance transactions or covered bonds programs.

IRELAND

Fitch Ratings (Feb. 23) opined that the September 2010 expiration of Irish government guarantees for certain obligations of Irish banks may have a negative rating impact on some structured finance transactions and covered bond programs where certain Irish banks remain counterparties and no further mitigants are put in place. However, Fitch stated that it has received feedback from covered bond issuers that they plan to take mitigating action prior to the expiration of the guarantee and that it expects similar action to be taken for structured finance transactions.

ITALY

Banco Populare (Feb. 24) priced a seven-year, €1 billion covered bond at 80 basis points over mid-swaps.

SWEDEN

LF Hypotek is planning a roadshow in anticipation of eventually issuing a benchmark covered bond, according to reports (Feb. 24).

UNITED KINGDOM

Barclays Bank PLC (Feb. 23) priced a twelve-year, €1 billion U.K. regulated covered bond at 72 basis points over mid-swaps.

Information from rating agencies in the entries above is typically adapted from those agencies' media releases.