Fitch upgraded Unnim Banc cédulas hipotecarias two notches from BBB+ to A on Friday after having placed the covered bonds on Rating Watch Positive (RWP) in the middle of September pending finalisation of an annual review.

The rating agency switched the Rating Watch status on Unnim’s covered bonds from negative to positive after upgrading the rating of the issuer, which is owned by BBVA, from BB+ to BBB+. On Friday it said that the A rating of the cédulas hipotecarias is mainly based on the issuer default rating, a Discontinuity Cap (D-Cap) of 0 (full discontinuity risk), and an overcollateralisation ratio of 83%.

The cédulas rating is on negative outlook.

According to Fitch, as of July 2012 outstanding Unnim cédulas hipotecarias amounted to Eu6.7bn and were secured over the bank’s total mortgage cover pool, of Eu12.9bn, resulting in a total OC of 92%.

“Unnim Banc publicly states its best efforts to maintain an OC of at least 90%,” said Fitch. “However, Fitch judges this not to be a contractual obligation, and consequently applies a 10% OC haircut on the lowest OC observed of the last 12 months (92%) to derive a total OC credited level of 83% within its analysis.”

Photo: Unnim