Santander Totta has become only the second European issuer to have a covered bond programme rated by DBRS, with the Portuguese bank gaining a A (high) from the rating agency in addition to ratings from the three established players.

The first European issuer to solicit a covered bond rating from DBRS was Caixa Económica Montepio Geral, which gained a A (low) rating in December. An official at Montepio told The Covered Bond Report at the time that the rating had been sought to help it maintain access to ECB funding, with its covered bonds at the time being rated Baa3/BBB- by Moody’s and Fitch.

However, Santander Totta’s covered bonds have the highest rating of any Portuguese covered bond programme, with Fitch and Standard & Poor’s having it in the single-A range and Moody’s having only recently cut it to Baa1 after downgrading Portugal. The CBR understands that Santander Totta will retain the three other rating agencies.

DBRS said that the rating is based on these factors:

• The covered bonds are senior unsecured direct deposit obligations of Santander Totta
• Portuguese covered bond laws, which in case of issuer insolvency give the holders of the covered bonds recourse to the cover pool in priority to other creditors
• DBRS legal and structuring framework assessment of “adequate”
• DBRS cover pool credit assessment of BBB (low)
• Issuer commitment overcollateralisation level of 30%
• Santander Totta’s capabilities with respect to origination of cover pool assets and servicing of the cover pool
• The credit quality of the collateral and structural features of the programme (extendable maturity and collateral eligibility criteria)