Fitch upgraded mortgage-backed Pfandbriefe issued by Corealcredit from AA- to AA on Friday after a public overcollateralisation (OC) commitment related to the covered bonds was withdrawn.

Corealcredit in July announced that it was to remove its public OC commitment following an upgrade by Fitch of the bank to BBB/F2 at the beginning of April as a result of Corealcredit being taken over by Aareal Bank Group, and the withdrawal came into effect on Friday. The announced withdrawal of the public OC commitment led the rating agency to place Corealcredit covered bonds on Rating Watch Positive (RWP) (see previous article for further details).

After the withdrawal came into effect on Friday, Fitch upgraded the covered bonds, and removed the rating from RWP. The outlook is stable, reflecting that of the issuer rating.

The Pfandbrief rating is based on a long term Issuer Default Rating (IDR) of BBB, an IDR uplift of 2, a Discontinuity Cap (D-Cap) of 4, and 14.9% OC that Fitch takes into account in its analysis.

“Following the withdrawal, Fitch bases its analysis on the lowest observed OC within the past 12 months, currently 14.9%, which is above Corealcredit’s former public OC commitment of 13.0%,” said the rating agency.