Fitch has put National Bank of Greece (NBG) Programme I covered bonds on Rating Watch Positive while it reviews its cap on ratings of Greek structured finance transactions, a move prompted by an upgrade of the sovereign and country ceiling last Friday (23 May).

The rating agency raised its rating of Greece to B and the country ceiling to BB on Friday. Because of this, it is now reviewing its B+ structured finance rating cap, which is the level at which the NBG programme is rated.

“Depending upon the outcome of the review, the covered bonds could be upgraded to a maximum rating of BB, provided that the programme’s asset percentage (AP) is lower than the breakeven AP for that rating level,” said Fitch.

It added that the potential upgrade to BB takes into account an IDR uplift of 1 that Fitch has assigned the programme due to the issuer’s large size in the domestic market and its interconnectedness with the country. NBG is rated B-, on stable outlook.

The programme has a Discontinuity Cap (D-Cap) of 0 and Fitch takes into account an AP of 55%.

“This level of AP provides more protection than the 75% breakeven AP for a B+ rating,” it said, “and would allow the covered bonds to achieve a three notch uplift based on the recovery prospects of the covered bonds assumed to be in default being in excess of 91%.”