The mortgage Pfandbrief programme of Corealcredit will remain active as a source of funding for the Aareal Bank Group, which recently acquired the commercial property lender, an intention that led Fitch to yesterday (Wednesday) affirm the covered bonds at AA-.

Aareal Bank Group in December announced that it was to purchase Corealcredit Bank from US fund Lone Star with a preliminary purchase price of Eu342m and the acquisition was completed effective 31 March. The Aareal group thus acquired a further Pfandbrief programme, Aareal Bank itself already being an issuer of public sector and mortgage covered bonds.

Fitch yesterday said that Corealcredit’s management informed the rating agency that “the mortgage Pfandbrief programme continues to be a relevant source of funding for the Aareal Bank Group” and that Corealcredit will continue to add cover assets to the cover pool and issue Pfandbriefe off the programme.

As at 30 April, the Corealcredit mortgage Pfandbrief cover pool stood at Eu2.97bn, backing Eu2.5bn of outstanding Corealcredit mortgage Pfandbriefe.

Because of the intention for the Corealcredit programme to be actively used as a source of funding Fitch is not classifying the programme as dormant. It affirmed Corealcredit mortgage Pfandbriefe at AA-, on stable outlook, taking the rating off Watch Evolving status, where it had placed the rating in January. The rating is based on a long term issuer default rating (IDR) of BBB, an IDR uplift of 2 and a Discontinuity Cap of 4, with moderate risk.

The covered bonds would be eligible for a higher rating on the basis of the above if Corealcredit were to maintain “a sustainable percentage of OC in line with the higher rating”, according to Fitch.