The Santander group is set to add French obligations foncières (OFs) to its suite of covered bonds, with S&P citing a proposed Eu500m inaugural issue in a pre-sale report published this week for a Eu5bn Santander Public Sector SCF programme backed by ECA-guaranteed loans.

The cover pool for the programme will comprise Export Credit Agency (ECA) guaranteed loans backed by the sovereigns of France, Germany and the UK. The respective shares are 64%, 26% and 10%, according to Standard & Poor’s pre-sale.

Similar collateral is already used in the public sector covered bond programmes of French banks such as BNP Paribas and Crédit Agricole, while Caffil is adding ECA-guaranteed loans to its cover pool.

S&P assigned a preliminary covered bond rating of AA, on negative outlook, to the programme and proposed inaugural issuance, citing the high credit ratings of the relevant sovereigns as among the programme’s strengths.

However, noting that the cover pool is highly concentrated, with only seven different obligors, S&P said the programme’s rating is capped at the lowest long term rating on the sovereigns backing the export credit agencies that guarantee the collateral.

The negative outlook therefore reflects its negative outlook on the long term unsolicited sovereign rating of France, the rating agency said.

S&P also noted that, as it does not rate Santander Public Sector SCF, it has uplifted the covered bond rating from its long term issuer credit rating of Banco Santander SA as it considers the issuer to be a core subsidiary of the Spanish bank, which is rated BBB+.

As well as its home cédulas hipotecarias covered bonds, the Santander group has already issued under various other jurisdictions’ frameworks, including Portugal and the UK in Europe and, further afield, Chile, for example.

S&P cited BNP Paribas as arranger of the programme.