Moody’s yesterday (Thursday) downgraded from Baa3 to Ba1 covered bonds issued by Hypo Alpe-Adria Bank following an Austrian Financial Market Authority (FMA) move on Sunday to initiate resolution measures on Heta Asset Resolution, the wind-down entity of the failed issuer.

Heta Asset Resolution on Sunday said the FMA had issued a decree on resolution measures, after the Austrian government said that it would not cover a capital shortfall shown after an asset quality review.

The downgrade of the covered bond programme came after Moody’s on Wednesday downgraded its rating of Heta debt guaranteed by the state of Carinthia from Caa1 to Ca and revised its assessment of Heta Asset Resolution’s unguaranteed senior unsecured debt.

The rating agency’s Timely Payment Indicator (TPI) for the covered bond programme remains “high”.

Moody’s noted the debt moratorium on Heta’s liabilities running until the end of May 2016. Heta public sector Pfandbriefe are excluded from the bail-in measures, according to analysts, although one noted this morning that this has not prevented the covered bonds’ link to the issuer from dragging their rating down.