Moody’s cut public sector covered bonds issued by UniCredit Bank AG from Aaa to Aa1 yesterday (Thursday) because of a downgrade of the issuer in March, with the issuer having passed on the possibility of defending the top rating by committing 8% overcollateralisation, according to the rating agency.

UniCredit Bank was downgraded from A3 to Baa1 on 21 March and Moody’s said that to maintain the Öffentliche Pfandbriefe’s (Oepfe) Aaa rating the issuer would have had to commit to maintain OC of 8%.

“However, UniCredit Bank AG confirmed that it will not provide any OC commitment beyond the statutory minimum OC level of 2%, prompting Moody’s downgrade of the public sector covered bonds’ ratings to Aa1,” said the rating agency.

The minimum OC level consistent with the Aa1 rating target is 4.5%, it added, of which the issuer is required to provide 0% in a committed form (numbers in present value terms).

The Timely Payment Indicator (TPI) of “high” assigned to the programme does not constrain the rating, noted Moody’s, and the TPI Leeway is one notch. The anchor point for the programme is the senior unsecured rating plus zero notches, under Moody’s methodology, given that the debt ratio is below 5%.