Moody’s yesterday (Thursday) assigned a rating of Aa1 to covered bonds issued out of a new Nykredit Realkredit capital centre for the refinancing of adjustable rate mortgage loans, while the Danish issuer expects Standard & Poor’s to assign a AAA rating in the coming days.

The capital centre, which will issue SDOs (særligt dækkede obligationer), was established for the refinancing of adjustable rate mortgages after Moody’s came out with a new analysis of the impact of having such loans in cover pools.

Nykredit Realkredit’s Capital Centre H will have a cover pool comprising solely ARM loans and floating rate loans that are not funded to maturity, said Moody’s.

“All bonds issued under this programme will be Short-Term Bullet (STB) covered bonds where the maturity date of the bonds and the maturity date of the underlying loans do not match,” said the rating agency. “Moody’s has considered the resulting refinancing risk for the STB covered bonds in its refinancing risk assessment.”

The issuance has been assigned a Timely Payment Indicator (TPI) of “high”. A revision in June from “very high” to “high” of the TPI Moody’s assigned to Danish issuance put pressure on the rating of Danish covered bonds, contributing to Nykredit Realkredit’s move to set up a new capital centre and actions by other Danes including the dropping of the rating agency by Realkredit Danmark.

Nykredit Realkredit will maintain, on an “uncommitted” basis, minimum overcollateralisation consistent with a Aa1 rating, said Moody’s, citing a current minimum of 5.5%, which is expected to be the initial OC level. Nykredit Realkredit is rated A2.

Nykredit Realkredit said in a statement today (Friday) that it expects the AAA rating from S&P.