Moody’s has placed on review for possible downgrade covered bonds involving Spain’s Banco CAM after having placed the issuer’s rating on review for downgrade because provisional consolidated financial statements revealed a “materially weaker” financial profile for the bank.

Multi-cédulas transactions in which Banco CAM participates are on review for downgrade alongside covered bonds issued by the bank.

The rating agency rates mortgage covered bonds issued by Banco CAM Baa1 and has assigned them a Timely Payment Indicator (TPI) of “probable”. It rates the bank’s public sector covered bonds A3, with a TPI of “probable-high”.

The rating agency rates Banco CAM Ba1 but placed the rating on review for downgrade last week because H1 2011 provisional consolidated financial statements published on 5 September reflected a “materially weaker” financial profile compared with that reflected in published figures from Q1 2011. The results published on 5 September are the first since the bank was nationalised, on 22 July.

Under Moody’s TPI methodology the combination of a Ba1 issuer rating and the aforementioned TPIs provides for a two notch leeway, meaning the issuer rating could be lowered two notches without automatically triggering a downgrade of the covered bond ratings.

Moody’s yesterday (Monday) said that it considers prevailing overcollateralisation levels to be “well above” the required levels to maintain the expected loss commensurate with the covered bond ratings.

“Therefore they would not be the primary reason for a downgrade of the covered bonds, if the issuer is downgraded,” it said.