Erste Europäische Pfandbrief- und Kommunalkreditbank was merged into Hypothekenbank Frankfurt International on Monday and the cover pools of the entities combined. S&P yesterday (Tuesday) cut public sector covered bonds issued by EEPK and withdrew the ratings at the issuer’s request.

Erste Europäische Pfandbrief- und Kommunalkreditbank (EEPK) and Hypothekenbank Frankfurt International (HFI), the former Eurohypo Lux, are Commerzbank subsidiaries specialised in public sector finance and are being wound down.

Effective Monday, EEPK was merged into HFI, which changed its name to Erste Europäische Pfandbrief- und Kommunalkreditbank (EEPK new).

“This merger unites companies of the same business field Non-Core Assets (NCA) within the structure of Commerzbank AG,” said EEPK. “There will be no change in the strategy.

“The existence of the corporation EEPK (old) ends with this merger and HFI will act as the bank´s legal successor. With effect from 1 September 2014 the cover pools of both entities will be merged.”

Standard & Poor’s cut public sector covered bonds issued by EEPK from A- to BBB+ yesterday and then withdrew the ratings at the issuer’s request.

The rating agency downgraded the lettres de gage because it considered the level of available overcollateralisation – 6.03% as of 1 July – to be commensurate with only a BBB+ rating.

“We would consider overcollateralisation of 6.47% to be commensurate with an A-rating,” said S&P. “Furthermore, the target credit enhancement increased to 13.33% from 11.74% and asset-liability mismatch increased to 6.62% from 5.75%, both owing to an increase in mismatches in cashflows compared with our previous analysis.”