UK

Moody’s does not believe that the UK Banking Act 2009 adversely affects the ratings of covered bonds.

Moody's yesterday (Tuesday) confirmed the Aaa rating of Principality Building Society's mortgage covered bonds following a restructuring of the issuer’s programme.

Fitch assigned Skipton Building Society’s mortgage covered bond programme an improved Discontinuity Factor, lowering it from 9.9% to 6.5%, after the issuer modified its programme to have a partial pass-through structure.

Moody's yesterday (Wednesday) confirmed the Aaa rating of Skipton Building Society’s covered bonds following a restructuring of the programme.

The UK government’s plan to split Northern Rock in two will result in covered bonds being assigned to the “bad bank” and being guaranteed to maturity, a European Commission document suggests.

Fitch yesterday (Wednesday) kept the AAA rating of Newcastle Building Society’s covered bonds on negative review, and affirmed Skipton Building Society’s covered bonds at AAA.

Fitch yesterday (Tuesday) downgraded the issuer long term default ratings of Newcastle Building Society and Skipton Building Society, and affirmed those of nine other UK building societies. However, the rating agency cut the senior unsecured debt ratings of all 11 building societies.

Northern Rock may buy back debt, potentially including subordinated debt, covered bonds and/or its Granite residential mortgage backed securities, as part of its transformation into a good bank/bad bank structure, it has been reported.

Fitch on Friday changed the Rating Watch on Northern Rock’s A- long term issuer default rating from positive to evolving because of the UK government’s proposal to split the bank into a company holding the bank’s legacy mortgage book and a smaller retail bank that would write new mortgage business.

Moody’s yesterday (Thursday) upgraded Bradford & Bingley’s covered bonds by two notches, from A1 to Aa2, with further upgrades possible.

Moody’s yesterday (Monday) upgraded Bradford & Bingley’s senior unsecured and deposit ratings from Baa3 to A2 as a result of an extension of the government guarantee that covers such debt. However, its subordinated debt was cut because the institution’s buy-to-let mortgage book is deteriorating more than expected.

Investors have been relieved to hear that Bradford & Bingley has paid off a Eu2bn covered bond that was due on Monday, after a misunderstanding by one of the counterparties to the transaction resulted in speculation that the deal would be extended by a year. The episode has nevertheless raised questions about aspects of the UK framework.