Caixa Económica Montepio Geral gained consent to convert two soft bullet covered bonds to conditional pass-throughs in bondholder meetings on Friday, in a move that is expected to result in an upgrade of the Portuguese bank’s issuance.

Montepio on 1 June announced a consent solicitation to convert to CPT structures two outstanding obrigações hipotecárias (OHs) – an Eu1bn December 2016 issue (PTCMKTOE0007) and a Eu500m May 2017 (PTCMGXOE0015), which are FRNs.

The meetings were held on Friday (1 July), with the quorum being 50% of the outstanding principal amount. The Portuguese issuer announced on Friday afternoon that the conversion had been approved, and said the changes were in force “regarding the already issued series under the programme and currently outstanding”.

Similar consent solicitations have typically offered fees for bondholders that vote in favour of proposed changes, but no fees were offered to participating Montepio bondholders, which some market participants said was unusual.

However, the two bonds targeted in the exercise were not initially placed publicly, and it is understood that they were retained before being sold on the secondary market. Montepio also has a third covered bond outstanding, a Eu500m December 2020 FRN, which is privately placed.

“The number of bondholders can therefore be assumed to be very manageable,” said analysts at DZ Bank. “The issuer itself, which also apparently holds the OHs affected, is also entitled to vote.

“Based on this information it is not surprising that the now usual ‘compensation’ of five basis points for this type of vote is not envisaged. It could well be that the bank has already reached agreement with the bondholders ahead of the actual voting rounds.”

Following the launch of the consent solicitation, Moody’s on 8 June placed its Baa1 ratings of Montepio’s mortgage covered bonds on review with direction uncertain. It said the review reflected the potential upward pressure on the ratings should the proposed changes be approved, but also the downward pressure on the covered bonds’ ratings following a downgrade of Montepio’s CR assessment from Ba3 to B1 on 7 June, which, the rating agency said, would have limited the covered bonds’ ratings at Baa2 should the restructuring have not been approved.

Fitch on 17 May placed its BBB- rating of Montepio’s OHs on Rating Watch Evolving, with no direction indicated. Fitch said the rating action follows a downgrade of the bank from B+ to B on 12 May, but that the review will take into account the issuer’s announcement that it intends to convert its covered bonds to CPT structures.

DBRS rates the OHs A.