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.