Moody’s downgraded covered bonds of Heta Asset Resolution from Ba1 to Ba2 yesterday (Thursday) following a deterioration of the foreign exchange (FX) mismatch in the programme.

After the recent redemption of its euro-denominated covered bonds, Heta Asset Resolution – the bad bank of Hypo Alpe-Adria-Bank AG – has only Swiss franc-denominated issues outstanding. As a result the, foreign risk in the Sfr250m (Eu231m) of outstanding bonds has increased, Moody’s said.

“After this increase in FX risk the committed overcollateralisation (OC) of 38.5% is no longer sufficient to support the Ba1 rating, and now the rating consistent with the expected loss analysis is Ba2,” Moody’s said.

The minimum OC level consistent with the Ba2 rating target is 64%, of which the issuer should provide 21.5% in a “committed” form, the rating agency added.