Spain

Caja Madrid yesterday (Wednesday) became only the second issuer to have its covered bonds upgraded by Standard & Poor’s upon implementation of the rating agency’s new methodology. This means that all cédulas, either single or multi-issuer, rated by S&P are now AAA.

Fitch downgraded three Spanish financial institutions yesterday (Tuesday) afternoon, while Standard & Poor’s put Caja Madrid on CreditWatch negative.

Fitch downgraded Banco de Sabadell’s rating from A+ to A, with a stable outlook, today (Tuesday) because of a deterioration in the bank’s asset quality and Spain’s weak economic environment.

Moody’s and Fitch yesterday (Wednesday) said that the takeover of CajaSur by the Spanish authorities has not affected the ratings of either covered bonds issued directly by the savings bank or those it participates in.

Fitch put CajaSur on Rating Watch Positive yesterday (Monday) after the Banco de España put the Spanish savings bank under the control of the Fund for the Orderly Restructuring of Banks (FROB).

The Banco de España has announced that CajaSur is being taken under the control of Spain’s Fund for the Orderly Restructuring of Banks (FROB), after merger discussions with Unicaja ended.

A merger of Caixa Catalunya, Caixa Manresa and Caixa Tarragona approved by the banks on Monday will create a new entity that will be the fourth largest Spanish savings bank. The transaction is the first major savings bank merger approved by the Bank of Spain and the European Commission, according to Caixa Catalunya.

Moody’s downgraded five multi-cédulas issues yesterday (Monday) because of a significant weakening of the credit strength of some of the participating issuers and “quite pronounced” deterioration of the quality of the collateral.

Standard & Poor’s yesterday (Wednesday) said that a downgrade of Spain from AA+ to AA, on negative outlook, would not “automatically” trigger cuts of Spanish financial institutions’ ratings, although it downgraded five Portuguese banks on Tuesday after lowering their sovereign’s rating that day.

La Caixa built a modestly oversubscribed order book for a Eu1bn three year public sector-backed deal yesterday (Tuesday) that has been the only benchmark covered bond issuance so far this week, with the pace of supply slowing markedly in comparison with previous weeks.

La Caixa launched a three year public sector covered bond this (Tuesday) morning at levels wider than those discussed last week to take into account an underperformance of Spanish government bonds since then. Only one publicly announced mandate remains in the pipeline, with volcanic ash potentially disrupting preparations for further supply.

La Caixa is expected to launch a cédulas territoriales transaction tomorrow (Tuesday), with benchmark covered bond issuance absent so far today in markets where risk appetite has reduced, partly unsettled by the levelling of fraud charges against Goldman Sachs.