Standard & Poor’s could gain from the pressure Danish issuers are facing from Moody’s, with BRFkredit in talks with S&P about rating its capital centres. The move was announced today (Wednesday) as one of a package of measures from BRFkredit, which Moody’s cut to Baa3 on Friday.

The Danish bank, which was downgraded from Baa1 to Baa3, nevertheless said that it will keep Moody’s as a “co-operation partner”. The rating agency also cut covered bonds (SDOs) issued out of BRFkredit’s capital centre E from Aa1 to Aa2 on Friday, and Danske analysts noted that a further one notch downgrade of the issuer would imply a drop in the covered bond rating to A2.

As part of its package of measures, BRFkredit will also establish a new capital centre (H) that will primarily refinance adjustable rate mortgage (ARM) loans – Nykredit Realkredit and Realkredit Danmark announced similar measures last week. Moody’s negative view of ARM loans is one of the key reasons for the pressure on its ratings of Danish covered bonds and Nykredit’s move was taken partly in reaction to this, while Realkredit Danmark terminated its relationship with Moody’s, saying that it disagreed with the rating agency about the fundamentals behind its rating model.

BRFkredit said on Friday that it “is surprised and unable to understand” Moody’s rating action.

The issuer had made a commitment in the documentation of covered bonds issued out of capital centre E to maintain a Aa1 rating by injecting capital if necessary, but BRFkredit said that Moody’s methodology made achieving such a rating impossible. It said today that it will establish a temporary covered bonds capital centre, M, to issue mainly fixed rate loans that will be unlisted, with the expectation that these will be transferred alongside the relevant collateral to another capital centre once a rating from S&P has been obtained. BRFkredit noted on Friday that the documentation for its capital centre E allowed it to make reference to an alternate internationally acknowledged rating agency’s rating at the same or higher level than Moody’s Aa1.

While Nykredit is taking other measures to address the ratings pressure from Moody’s and other factors, BRFkredit said that “so far, no further structural initiatives and alternatives… have been decided”.