Fitch placed Corealcredit mortgage Pfandbriefe on Rating Watch Evolving (RWE) on Friday, reflecting the likelihood of a rating change as a result of the planned takeover of Corealcredit by Aareal Bank.

Aareal Bank Group announced on 22 December that it is buying Corealcredit Bank from US fund Lone Star, and on 27 December Fitch placed Corealcredit’s issuer default rating (IDR) of BBB- on Rating Watch Positive.

The rating agency on Friday said that it is at this stage assuming that Corealcredit’s and Aareal’s mortgage Pfandbrief cover pools will not be merged in the short term.

Fitch rates Corealcredit’s mortgage Pfandbriefe AA-, and on Friday said that a rating action linked to the announced takeover by Aareal depends on strategic decisions regarding Corealcredit’s future covered bonds business.

“If Corealcredit’s IDR is upgraded following the completion of the transaction, its mortgage covered bonds would be eligible for an upgrade, provided the bank committed to maintain a percentage of overcollateralisation (OC) in line with a higher rating,” it said. “If the existing public commitment of 13% was maintained, the current AA- mortgage Pfandbriefe rating would most likely be affirmed.

“If the bank decided to remove its existing public OC commitment, the mortgage Pfandbriefe rating would be downgraded.”

If Fitch considers Corealcredit’s mortgage Pfandbrief programme to be dormant, it would rely in its analysis on a public commitment on the maintenance of OC or, in its absence, on the minimum OC required by the Pfandbrief Act. In the latter case the Pfandbriefe would be cut to one or two notches above the bank’s IDR, according to Fitch.