Fitch has withdrawn its rating of public sector Pfandbriefe issued by Düsseldorfer Hypothekenbank, a programme it considers to be in wind-down, after downgrading the bonds from AA- to BBB+.

The rating agency withdrew the ratings because it will no longer have sufficient information as a result of the issuer having chosen to stop participating in the rating process, it said. The Covered Bond Report was unable to reach DüssHyp for comment.

Fitch’s BBB+ rating of DüssHyp was based on a BBB- issuer rating, a Discontinuity Cap (D-Cap) of 4 (moderate risk) and publicly committed overcollateralisation of 13.2%, with the rating also depending on Germany’s AAA rating given that 41% of the cover pool is directly exposed to or guaranteed by the German sovereign and federal states.

Fitch said that the downgrade was driven by increased loss expectations due to a continuing downward trend in some sovereign ratings as well as increased market risks resulting from asset-liability mismatches.

“As a result, the publicly committed OC that Fitch takes into account in its analysis of 13.2% limits the programme to a BBB rating on a probability of default (PD) basis and supports a BBB+ rating considering recoveries given default,” it said.

DüssHyp’s cover pool contains a high portion of exposures to Italy (10%) and Spain (9%), added the rating agency, with around 22% of the cover pool assets having been affected by downgrades since Fitch’s last programme review in October 2011. The average portfolio rating of the exposures which are not credit-linked to the German sovereign now stands at A-/BBB+ compared with A- in October 2011.

As of the end of June 2012, DüssHyp had Eu4.9bn of outstanding public sector Pfandbriefe, which were secured by a cover pool worth Eu5.6bn, resulting in nominal OC of around 14.5%.

DüssHyp was rescued from near collapse in 2008 when it was taken over by Bundesverband deutscher Banken (BdB), a German banking association, before being bought by US investment firm Lone Star. Fitch noted that the issuer has publicly stated that it will exit the public sector business and that the rating agency therefore considers the programme to be in wind-down.

The rating agency in July cut the bank’s Viability Rating to C but affirmed its issuer default rating at BBB-, on stable outlook, and at the time said that an aggressive downsizing process being pursued by the bank should benefit its bank’s funding and liquidity profile but, at the same time, put its capital under increasingly “unbearable” pressure.