Fitch downgraded Banco Popular Portugal mortgage covered bonds from BBB- to BB yesterday (Thursday) before withdrawing the rating, saying that the Portuguese bank has chosen to stop participating in the rating process.

The downgrade of the obrigaçöes hipotecárias was the result of a cut in the issuer’s rating from BB+ to BB last Friday (21 September) and a lowering to 10% of the overcollateralisation level to which the issuer is committed. Fitch said this level falls short of providing above average stressed recoveries from the cover pool in the event of an issuer and covered bonds default, and the rating agency therefore equalised the OH rating with the issuer’s.

Fitch said that with the issuer no longer participating in the rating process it expects it will lack sufficiently detailed information to form a complete credit view under its covered bond rating methodology and hence will no longer provide analytical coverage of the OHs.