Fitch placed on Rating Watch Evolving the AA+ rating of mortgage covered bonds issued by SNS Bank today (Wednesday) after having taken the same action on the issuer following its nationalisation together with its parent SNS Reaal.

Fitch said that the Rating Watch Evolving (RWE) on SNS’s covered bond programme reflects uncertainty over how the SNS group will be restructured and how covered bonds will be used as a funding instrument.

SNS’s covered bonds are rated AA+, based on a Discontinuity Cap of 4 (moderate) and asset percentage of 67.4%, the level that Fitch gives credit to and is the highest asset percentage observed over the 12 months leading to January.

If Fitch deemed the programme to be in wind-down the uplift of the covered bonds’ rating above the issuer rating could be cut by up to two notches, said the rating agency.

According to Fitch, the rating action was driven by the placing on RWE of SNS’s issuer rating (BBB+) after the nationalisation of the bank and SNS Reaal on 1 February by the Dutch government. (See previous coverage here)

Fitch said that the RWE on the issuer and its parent reflects uncertainty about which measures will be taken by the Dutch authorities to stabilise the financial situation of the group before a targeted return to private ownership. The rating action will be resolved once details on the restructuring plans emerge, including a possible spin off or sale of some operations. Decisions about the restructuring of the group will be made in the next six months in Fitch’s view.