Twenty-two multi-cédulas were upgraded yesterday (Thursday) from BBB- to BBB+ by Standard & Poor’s, which noted that the issues were previously rated lower because they included cédulas hipotecarias of UniCaja Banco that were a limiting factor under the rating agency’s weak-link approach.

The upgraded issues are off the AyT Cédulas and Cédulas TDA platforms. Five others that were already rated BBB+ were affirmed, and all multi-cédulas rated by S&P are now BBB+.

The rating actions came after a periodic review by S&P.

“Since our previous analysis, CHs (cédulas hipotecarias) have redeemed in the issuers’ covered bond programmes and there have been no further CHs issuances,” it said. “This, together with better credit results, has resulted in the ACE (available credit enhancement) exceeding the TCE (target credit enhancement), and our assessment of the CHs is now commensurate with a BBB+ rating in all cases.

“Credit numbers have improved, resulting from better quality data provided and improved collateral performance.”

Under S&P’s weak-link approach to multi-cédulas, the underlying CHs with the weakest credit quality constrain the rating on the pooled issue, irrespective of size.

S&P noted yesterday that 25 multi-cédulas had as a result been rated lower than the maximum multi-cédulas rating, at BBB-. This was because of the participation of UniCaja Banco, whose CHs had available adjusted credit enhancement that was only commensurate with a BBB- rating. However, three of the 25 multi-cédulas have now redeemed and the other 22 are now able to be rated BBB+.

The full list of multi-cédulas included in yesterday’s rating actions can be found by clicking here (requires registration/subscription).

Michael Spies, covered bond and SSA strategist at Citi, said the impact of the upgrades on the multi-cédulas spreads will likely be limited, but said the move underscores Citi’s long term bullish view on multi-cédulas.

“Given the spread pick-up versus single-cédulas after the latest widening, we continue to like the wider trading multi-structures to single-cédulas peers,” he said.

Spies added, however, that Spanish covered bonds and multi-cédulas continue to look expensive versus non-Eurozone peers and Spanish government bonds.