UniCredit has set up a second covered bond programme, which The Covered Bond Report understands to be aimed at generating collateral for the repo market, ECB operations, or bilateral funding operations.

The Eu25bn obbligazioni bancarie garantite (OBG) programme provides for issuance of covered bonds backed by residential and commercial real estate.

UniCredit has a pre-existing, Eu20bn, OBG programme, which was established in 2008. The new programme is understood to differ from the pre-existing one in that it is not designed to be used for market funding, with issuance aimed at growing the bank’s “counterbalancing capacity” by generating eligible collateral for the repo market, European Central Bank facilities, or bilateral funding operations.

In addition, while the Eu20bn OBG programme is rated triple-A by Moody’s, Fitch, and Standard & Poor’s, the new programme’s rating does not incorporate any uplift from the issuer rating. The new programme’s rating is based on UniCredit’s issuer rating. The bank is rated A2 by Moody’s, A- by Fitch and A by S&P.

A covered bond analyst said that the rating of the new programme suggests a very different structure to that of the older programme and minimal overcollateralisation, and that the new programme is unlikely to affect the programme targeting the public markets.

“Unsecured creditors indirectly benefit as ECB funding is of course better than no funding (thereby reducing probability of default),” he added. “However, expected recovery values for unsecured creditors will be diluted by increasing use of ECB repo.”