Novo Banco issued Eu3.7bn of conditional pass-through (CPT) mortgage covered bonds on Wednesday off a new programme with an A3 rating after having cancelled Eu3bn of issuance off an existing programme with a Baa2 rating, and in doing so extended the maturity of its debt.

The Portuguese bank, which is the good bank created after the collapse of Banco Espírito Santo, announced the moves in a filing with the Portuguese Securities Market Commission (CMVM) on Wednesday. Three Eu1bn issues maturing between July 2017 and January 2018 were cancelled and Novo Banco issued Eu1bn of three, four and five year covered bonds and a Eu700m seven year.

Moody’s on Wednesday assigned a provisional rating of A3 to the CPT covered bonds, saying this reflects the credit strength of Novo Banco, a covered bond anchor of the Portuguese institution’s Counterparty Risk (CR) assessment of B1 plus one, notch and the value of the cover pool. The stressed level of losses on the cover pool assets following a covered bond anchor event for the transaction is 18.3%, Moody’s said.

Overcollateralisation (OC) in the cover pool is 9.6%, of which the issuer provides 5.3% on a “committed” basis, is consistent with the minimum 9% level required for the A3 rating, Moody’s said.

The rating agency added that it considered a number of other factors in its analysis of the cover pool’s value, namely exposure to market risk, which is 13.3%, the robust Portuguese legal framework for obrigações hipotecárias (OH) and the benefits of the CPT mechanism. It also noted that as of Wednesday, Novo Banco reported a cover pool of around Eu4.054bn, with the collateral score for the cover pool at 7.5%.

The Timely Payment Indicator (TPI) assigned to the programme is “probable-high” and Moody’s noted that it has zero notches of TPI Leeway.