Moody’s has placed on review for downgrade Aa1 public sector and Baa1 ship Pfandbriefe issued by HSH Nordbank after financial results for the first half of 2012 prompted the rating agency to review for downgrade the issuer’s rating.

The rating action was announced on Friday, a week and a half after Moody’s placed on review for downgrade the Baa2 rating of HSH Nordbank.

The issuer review was triggered by recently reported results for the first half of the year, which Moody’s said showed deterioration in HSH’s operating performance and the reaching of a minimum boundary of the bank’s core Tier 1 capitalisation of 10%, as required by the European Commission (EC). The rating agency also said that a gradual shortening of the bank’s funding maturities in the context of the long duration of most of the bank’s asset base is causing additional downwards ratings pressure.

HSH’s public sector Pfandbriefe carry a Timely Payment Indicator (TPI) of “high”, which in combination with the issuer rating means there is zero TPI leeway. A downgrade of the issuer rating can therefore be expected to lead to a downgrade of the covered bonds, said Moody’s.

The rating agency rates ship covered bonds one notch above the issuer rating, so any lowering of the latter would directly affect the rating of the ship Pfandbriefe, noted Moody’s. The TPI assigned to the covered bonds is “improbable”, but does not constrain the rating.

Photo: HSH Nordbank