Standard & Poor’s revised from negative to positive the CreditWatch status of BBB- rated Catalunya Banc mortgage covered bonds on Friday because the issuer is due to be acquired by BBVA. The cédulas hipotecarias had been placed on CreditWatch negative in mid-June.

The rating action comes after the Spain’s Fund For Orderly Bank Restructuring (FROB) on 21 July announced that it had decided to award Catalunya Banc to Banco Bilbao Vizcaya Argentaria (BBVA).

“In our view, BBVA’s acquisition of Catalunya Banc would have a positive effect on our ratings on the covered bonds, in light of BBVA’s creditworthiness,” said S&P.

In addition, it would remove any uncertainty surrounding Catalunya Banc’s future creditworthiness, according to the rating agency, which it said had led it placing the bank’s covered bonds on Credit Watch negative on 17 June.

Stephan Dorner, covered bond analyst at Crédit Agricole, said that the CreditWatch positive status could be followed by an upgrade of the covered bonds to their previous BBB rating or higher, which would put the average rating in investment grade and would allow the cédulas hipotecarias to move back into the iBoxx euro covered bond index, an important change.

Catalunya Banc’s covered bonds are rated Ba1 by Moody’s.

S&P said that the acquisition of Catalunya Banc by BBVA is expected to close in the coming months upon compliance with the legal prerequisites and upon the approval of the relevant national and European authorities. It noted the completion of a sale of a Eu6.4bn portfolio of Catalunya Banc’s mortgage loans and said that it will analyse the effect of the mortgage portfolio’s sale on its ratings on the covered bonds once it receives more detailed information on the loans included in the sale.

The sale is subject to administrative authorisations, including that of the European Commission, said S&P.