Austria

Moody's will not give any economic value to non-EEA assets outside Switzerland, the US and Japan in German cover pools, but will continue to give full value to Swiss collateral backing Austrian and German covered bonds, the rating agency said yesterday (Tuesday).

UBS this (Wednesday) morning launched a Eu1.25bn 12 year transaction that will conclude what, according to Dealogic, has been the busiest quarter in the history of the benchmark covered bond market. Meanwhile, an Austrian issuer is preparing to return to the market after an absence of almost five years.

A positive reception for Erste Group’s inaugural public sector benchmark covered bond demonstrated that perceptions of Austrian credit have moved on after a period of negative headlines, a syndicate official at one of the leads told The Cover. Meanwhile, Dexia wrapped up its forth benchmark covered bond of the year.

Deals for Dexia Kommunalbank and Erste Group got the primary market off to a strong start this (Tuesday) morning, with both issues oversubscribed and executed swiftly. Further issuance is expected this week, with SNS Bank already sounding out a new issue.

Moody’s cut public sector unguaranteed covered bonds issued by Hypo Alpe-Adria-Bank International from Aaa to Aa1 yesterday (Wednesday) following a downgrade of the issuer’s rating from Baa1 to Baa2 last Friday (4 December).

Moody’s has cut Hypo Alpe-Adria-Bank International’s rating from Baa1 to Baa2, on review for possible further downgrade, after the bank announced that it expects a net loss for the financial year 2009 of more than Eu1bn.

The split of covered bond issuer Kommunalkredit Austria became effective this weekend, into a new bank known as Kommunalkredit Austria and a company, KA Finanz, that will hold the former Kommunalkredit’s non-strategic assets and be wound down. Outstanding covered bonds are understood to have been allocated to the new bank.

Four Austrian covered bond issuers’ long term ratings were yesterday (Thursday) put on review for downgrade by Moody’s after a recalibration exercise on the country’s banks.

Kommunalkredit Austria has informed Moody’s that it plans to provide enough overcollateralisation for its public sector covered bonds to preserve their Aaa rating.

Moody’s yesterday (Tuesday) downgraded Kommunalkredit Austria’s long term senior rating from Aa3 to Baa1, on stable outlook, citing the bank’s impaired franchise and longer term uncertainty about its future as a standalone viable entity.

Covered bonds made a comeback in the Swiss franc market this week, as investors reached for a highly rated asset class that, unlike other triple-A product, still offers a spread above mid-swaps.

Moody’s will conclude its review of Kommunalkredit Austria’s ratings within the coming weeks on the basis of the banking group’s existing structure and profile without, as originally planned, taking into account comments from the European Commission on the bank’s restructuring plan.