The TPI assigned to the covered bonds is now Probable, according to Moody’s, having previously been Improbable. The change in the TPI has been prompted by the change in the sovereign rating, which is now in investment grade territory, Moody’s added.
FHBʼs covered bonds benefit from a commitment of the issuer to always maintain (i) sufficient liquid assets to cover 12 months of net outflows, and (ii) 13.0% of over-collateralization (OC) in both nominal and net present value terms, Moody’s said. The TPI framework caps the rating in the Baa1-Baa3 range, while taking into consideration the structure of the program and the applicable covered bond law, with the TPI cap placed at Baa2 (in the middle of the range), Moody’s added.
The minimum OC consistent with a Baa2 rating is 8.5%. Currently the OC in the program is 24.9%, of which 13.0% is in committed form.
The upgrade of the covered bonds follows the upgrade of the CR assessment of the issuer from B2(cr) (on review for downgrade) to B1(cr), and the sovereign rating of Hungary from Ba1 to Baa3.
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