Moody’s cut 18 cédulas programmes and 58 multi-cédulas transactions on Friday, leaving the majority on review for downgrade, following downgrades to the cédulas issuers or those participating in the pooled Spanish covered bond transactions.

The rating agency cut 13 mortgage covered bond programmes and five public sector backed programmes. The multi-cédulas downgrades are to issues launched through the AyT Cédulas, Cédulas TDA, IM Cédulas and Pitch platforms.

The cédulas hipotecarias of Banco Pastor and Caixa Catalunya were cut seven notches from Aaa to Baa1, after their issuer ratings were lowered to Ba1.

The lowest rated multi-cédulas is now Cédulas TDA 17, which was cut to Baa2 and left on review for downgrade, while the majority are around the Aa2 level, but on review for downgrade.

The reasons cited for the single-issuer cédulas downgrades were similar to those for the multi-issuer actions.

“The downgrade of the issuers’ ratings poses credit risk to the current SMICB (Spanish multi-issuer covered bond) ratings, from both an expected loss and timeliness of payment perspective,” said the rating agency. “The rating downgrade of the senior unsecured ratings of the covered bond issuers follows the downgrade on 10 March 2011 of the debt rating of the Kingdom of Spain to Aa2 (negative outlook).

“It also reflects Moody’s reassessment of the extraordinary level of systemic support – of up to five notches – that had been embedded in many Spanish banks’ ratings, limiting support to more normalised levels.”

Moody’s said that 64 multi-cédulas remain on review for downgrade because some of the participating banks remain on review for downgrade. Six single-issuer mortgage backed programmes, four of which were downgraded on Friday, and three of the public sector backed programmes cut on Friday remain on review for downgrade for similar reasons.

Source: Moody’s, Deutsche Bank