Moody’s upgraded mortgage covered bonds of Novo Banco, the good bank created after the collapse of Banco Espírito Santo (BES), from Ba1 to Baa2 yesterday (Thursday), after the Portuguese institution was assigned a Counterparty Risk (CR) assessment of B1.

The rating agency said that the covered bond anchor for the obrigações hipotecárias (OHs) is the CR plus one notch, and that combined with a Timely Payment Indicator (TPI) of “improbable” this restricts the covered bonds’ rating to Baa2. It noted that the overcollateralisation (OC) in the cover pool is 32.5%, of which the issuer provides 5.3% on a “committed” basis, compared with a minimum OC level consistent with the Baa2 rating target of 2.5%.

The upgrade comes after Moody’s also, on Wednesday, upgraded the senior unsecured rating of Novo Banco to B2, outlook developing.