Downgrades of France, Italy, Portugal and Spain by Standard & Poor’s on 13 January as part of rating actions on 16 euro-zone sovereigns have led to cuts to two Portuguese covered bond programmes, and one Italian and one Spanish programme, while three French issuers’ covered bonds escaped being cut as a result of the sovereign downgrades.

The rating agency also placed various Portuguese and Spanish bank ratings on Credit Watch Negative after downgrading Portugal to sub-investment grade (BB) and Spain to A, with both sovereign ratings on negative outlook.

S&P yesterday (Tuesday) cut the ratings of mortgage covered bonds issued by Banco Santander Totta (from A to A-), and mortgage and public sector covered bonds issued by Banco BPI. BPI’s mortgage covered bond (obrigações hipotecárias) programme was downgraded from A+ to A- and its public sector programme (obrigações sobre o sector public) from BBB to BB+.

The covered bond ratings remain on negative review, in line with the status of the issuer ratings. S&P said that the rating actions reflect Portugal’s revised sovereign rating and the impact of the country risk exposure on the covered bond programmes.

Banco BPI last Thursday launched a tender offer to buy back a Eu1bn 2015 mortgage covered bond, and S&P said that it will consider this liability management exercise as well as any changes in the composition of the cover pool.

S&P also downgraded public sector covered bonds issued by Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), from AA to A+, on negative outlook. This follows a two notch downgrade of the sovereign on 13 January, from AA- to A.

The rating agency on 13 January also cut Italy, from A to BBB+, and yesterday downgraded the ratings of mortgage covered bonds issued by UniCredit, from AAA to AA+, on negative outlook.

S&P removed from CreditWatch Negative two French covered bond programmes – public sector backed obligations foncières for Credit Mutuel Arkéa and Société Générale – because it considers that the available credit enhancement for the programmes is commensurate with the maximum potential ratings uplift under its criteria for rating covered bonds. S&P rates Société Générale’s and Arkéa’s SCF programmes one notch above the sovereign (AA+), the maximum differential under its criteria for rating covered bonds above the rating of the related sovereign in the euro-zone. The covered bond ratings are on negative outlook.

The rating agency has maintained public sector covered bonds issued by France’s Dexia Municipal Agency on negative review, although this is because S&P is reassessing credit and cashflow risks in the programme. S&P resolved the negative review placement of France’s rating when it downgraded the sovereign from AAA to AA+ on 13 January.

S&P yesterday also placed on negative review various Portuguese and Spanish bank ratings, including the long term ratings of Spain’s Banca Cívica (BBB) and Portugal’s Banco Espírito Santo (BB). The long term ratings of some other Portuguese and Spanish banks remain on CreditWatch Negative, although S&P said that it is updating the reasons for this, “a process that could potentially increase the magnitude of any downgrades”.