Moody’s placed Baa1 rated mortgage covered bonds issued by Banco de Valencia on review with direction uncertain on Friday after the rating agency assigned a developing outlook to the issuer’s Ba2 rating.

The developing outlook on the issuer reflects the rating implications of a possible sale of the bank, said Moody’s, in particular if the sale process is completed, or if the Spanish Fund for Orderly Bank Restructuring fails to conclude it.

Moody’s said the developing outlook serves to highlight: the possibility of the bank’s rating being upgraded if it is acquired by a stronger peer; the possibility of negative rating actions (including the potential for a multi-notch downgrade) if the resulting entity after the sale displays a weaker credit profile than Banco de Valencia’s standalone financial strength; and the possibility of Banco de Valencia’s standalone rating being downgraded if the sale process fails to succeed and the government weakens its current support for the bank.

The Timely Payment Indicator (TPI) for the programme is “probable”.