ING Belgium is set to become the third Belgian covered bond issuer, having set up a Eu10bn programme that it will roadshow next week after having in early November received a licence to issue Pandbrieven, just under a year after the first Belgian covered bond was issued.

ING Belgium HQ, Brussels

On 5 November the bank received a licence from the National Bank of Belgium to issue Belgian legislative covered bonds (Pandbrieven). It has set up a Eu10bn mortgage backed programme, which it will present to investors starting on Monday. Barclays, BayernLB, ING, Société Générale and UniCredit have the mandate.

Belgium is the most recent European newcomer to legislative covered bonds, with the country’s Pandbrieven law having come into effect on 3 September 2012.

Belfius Bank priced the first Belgian covered bond on 19 November, a Eu1.25bn five year, with a KBC Bank debut following shortly afterwards. Belfius has sold three euro benchmark covered bonds totalling Eu2.25bn and KBC four totalling Eu3.75bn. The last Belgian issue was a Eu750m three year for KBC priced at 5bp over mid-swaps on 22 August.

ING Belgium’s covered bonds have been provisionally rated triple-A by Fitch and Moody’s, with both rating agencies announcing their ratings yesterday (Tuesday).

Fitch’s rating is based on an A+ issuer default rating, a Discontinuity Cap (D-Cap) of 4 for “moderate risk”, and overcollateralisation (OC) of at least 43%. The AAA rating could survive a two notch downgrade of the issuer, all else being equal. The Pandbrieven feature a soft bullet maturity and are backed by a cover pool of residential mortgage loans currently totalling Eu2.5bn.

Moody’s provisional Aaa rating of the covered bonds reflects an A2 deposit rating for ING Belgium and modelled cover pool losses of 24.3%, in turn capturing a collateral score of 9.2%, and 18.2% market risk, and post-debut issuance overcollateralisation in excess of 24.5%, the level necessary to support the target rating. The issuer will provide 5% OC in committed form, according to Moody’s.

It has assigned a Timely Payment Indicator (TPI) of probable to the covered bonds.