TEXT-Fitch afrms LB Berlin’s & Berlin Hyp’s public sector Pfandbriefe at ‘AAA’
LBB’s and BHH’s downgrade does not affect the maximum rating achievable on a
probability of default (PD) basis for LBB and BHH’s public sector Pfandbriefe
which is still ‘AAA’. For BHH’s mortgage Pfandbriefe, the maximum achievable
rating on a PD basis is now limited to ‘AA+’ from ‘AAA’ previously. For all
three programmes, the level of overcollateralisation (OC) supporting the
existing rating is increasing. This is because no interest rate and foreign
exchange rate stresses have so far been applied in the analysis, in line with
Fitch’s counterparty criteria for rating covered bonds from issuers rated at
least ‘AA-’ /’F1+’.After LBB’s downgrade, the application of these stresses leads to an increased
OC level of 15.3% from 7.9% supporting a ‘AAA’ rating (see ‘Fitch Affirms
Landesbank Berlin AG’s Public Sector Pfandbriefe at ‘AAA” dated 6 December 2010
at www.fitchratings.com). This is below the lowest level of OC held in the
programme over the past 12 months (76%) and hence justifies the rating
affirmation.For BHH’s public sector programme, the level of OC supporting the ‘AAA’ rating
has increased to 11.5% from 10.8% when incorporating interest and FX stresses
(see ‘Fitch Affirms BerlinHyp’s Public Sector Pfandbriefe at ‘AAA” dated 23
June 2011 at www.fitchratings.com). This is below the lowest level of OC held in
this programme over the past 12 months (13.4%), and hence justifies the rating
affirmation.The ‘AA+’ rating of BHH’s mortgage covered bonds programme was based on the
issuers IDR and a recovery given default analysis. The OC supporting a two notch
uplift above the IDR stood at 12%. The agency has decided to put the programme
on RWE as the issuer has delivered new and more detailed data and also indicated
that it is willing to increase the level of OC. The current nominal OC stands at
17.4%. The agency is currently analysing the pool based on the most recent data
and will incorporate interest rate and FX stresses in its determination of the
OC supporting a ‘AA+’ rating. Fitch expects the RWE to be resolved by the end of
November.
