Moody’s cut HSH Nordbank Pfandbriefe yesterday (Tuesday) as a consequence of a downgrade of the issuer on Thursday, with the mortgage covered bonds remaining on review for downgrade pending implementation of committed overcollateralisation.

Moody’s downgraded HSH Nordbank from Baa2 to Baa3 on Thursday due to expectations about external support and uncertainties arising from a pending final EC ruling on state aid compensation measures.

The rating agency said that the downgrade of the issuer prompted the downgrade of the covered bonds.

HSH mortgage and public sector covered bonds were cut from Aa1 to Aa2, the maximum achievable rating under Moody’ s Timely Payment Indicator (TPI) framework, and its ship Pfandbriefe from Baa1 to Baa2, one notch above the issuer rating as a result of the rating agency’s expected loss analysis.

The mortgage Pfandbriefe remain on review for downgrade pending implementation of 4.5% committed overcollateralisation (OC), said Moody’s.

“The overall OC necessary to achieve the Aa2 rating target is 13.0%,” it said. “Currently, the transaction benefits from an overall OC of 23.7% of which 2.0% are committed as required by the German Pfandbrief Act. The OC for an Aa3 rating is 9.5%, of which 0% needs to be in committed form.”