Moody’s was the last rating agency to react to the change of ownership and renaming of Dexia Municipal Agency when it upgraded covered bonds issued by successor entity Caisse Française de Financement Local from Aa2 to Aaa yesterday (Tuesday).

The rating agency said that the upgrade was prompted by the transfer of Caisse Française de Financement Local’s (CFFL’s) ownership from Dexia Crédit Local to Société de Financement Local (SFIL), which Moody’s now considers the programme’s sponsor bank.

Moody’s rates SFIL Aa2, on negative outlook, seven notches above Dexia Crédit Local’s Baa2 rating, which is on negative outlook. The rating agency said that SFIL’s Aa2 rating includes five notches of uplift above its standalone credit profile of Baa1 because of the high likelihood of government support considering that the bank is 75% owned by the French state.

Moody’s also assigned to SFIL a standalone credit profile of Baa1, which is higher than Dexia Credit Local’s Ca, as SFIL’s activity will be mainly restricted to lending to French authorities and hospitals, said the rating agency.

The covered bonds’ rating was previously constrained at Aa2 because of the combination of Dexia Crédit Local’s rating and a Timely Payment Indicator of “probable-high”. The programme now has a TPI leeway of four notches, meaning that the covered bonds might be downgraded as a result of a TPI cap once the issuer rating is downgraded below A2, all other variables being equal, said Moody’s.

Following the rating action, CFFL’s covered bonds are now triple-A rated by S&P, Fitch and Moody’s.