Marfin Popular Bank has retained the first covered bond to be issued under Cypriot legislation, a Eu1bn deal off a Eu5bn residential loans backed programme. The issuer said that it does not expect to launch a public deal any time soon.

Moody’s assigned a Baa1 rating, on review for possible downgrade to the deal, which was launched on Tuesday. The bank is rated Baa3, on review for downgrade.

MPB’s covered bond programme is under a Cypriot framework that was completed in December. It is the first Cypriot financial institution to utilise the new legislation for covered bonds (kalimmena axiografa), although it has previously issued under Greek legislation through its Greek arm.

“We participated in the extensive consultation period with authorities, which has resulted in a strong law,” said Dimitrios Spathakis, Marfin Egnatia Bank deputy head of wholesale funding. “We believe that the market participants find the legal framework robust, offering extensive protection to the covered bond holders.

“Our plan is to continue issuing out of the new residential programme and to use other asset types eventually as well,” he added.

MPB expects to issue another retained covered bond within the next couple months, said Spathakis, but has no imminent plans for a public deal.

“Should market conditions improve, we will have a market transaction,” said Spathakis. “However, we do not see this in the foreseeable future.

“I can probably safely say that we won’t see a public issue for at least the next few months.”

Moody’s assigned a Timely Payment Indicator (TPI) of “improbable” to the programme, based on the belief that the ability of the Cyprus government or financial institutions to support covered bonds following an issuer default could be weakened owing to the large size of the banking sector compared with the economy.

As of April, the cover pool totalled around Eu1.1bn, according to Moody’s. It said that Marfin has committed on a contractual basis to a minimum overcollateralisation level of 5%. Moody’s gave the cover pool a collateral score of 24.1%.