Fitch today (Friday) placed public sector covered bonds issued by Cassa Depositi e Prestiti on Rating Watch Positive (RWP) following an announcement of a desegregation of the cover pool (patrimonio separato), which will be returned to the issuer in exchange for a full cash collateralisation of the principal and interest due on the covered bonds.

The RWP is further based on specific indications provided by CDP about the segregation of the cash collateral account and eligible investments, said Fitch.

CDP’s programme has Eu5.064bn in outstanding covered bonds. Most of the outstanding bonds mature in the next 14 months.

Fitch expects that the changes in the programme will have either a positive impact or no impact on the covered bonds’ ratings, as reflected in the RWP.

Full legal and beneficial ownership of the Eu13.4bn cover pool of loans to Italian local authorities and public entities is expected to be returned to CDP. A collection account in the name of CDP but for the exclusive benefit of the covered bondholders has been set up with Bank of New York Mellon (Luxembourg) Italian branch, reported Fitch. It added that CDP had deposited Eu5.335bn into the collection account, equal to total principal and interest due on the covered bonds until maturity plus a buffer of Eu500,000 to cover senior costs and expenses.

“Fitch understands that the collection account will become segregated within the next few days and eligible investments have already been purchased with the amount deposited,” the rating agency said.

According to amendments to the programme documentation, CDP “retains the obligation to make whole any loss that could be incurred on the investments if proved insufficient to pay down the covered bonds principal and interest in full”.