BBVA could issue the first cédulas de internacionalización, Spanish covered bonds backed by guaranteed export credits, after having today (Wednesday) received a provisional Moody’s Aa2 rating for expected issuance of Eu1bn.

Cédulas de internacionalización (CI) were established as a class of Spanish covered bonds backed by guaranteed export credits under a law passed in July 2012.

While no CIs have been issued yet, banks in other countries have already included loans guaranteed by ECAs as collateral for covered bond issuance, with Crédit Agricole using Coface-guaranted loans under French covered bond legislation, for example.

Moody’s today assigned a provisional Aa2 rating to the CIs of Banco Bilbao Vizcaya Argentaria.

The rating agency said BBVA’s cover pool consists of export finance loans guaranteed by different export credit agencies (ECAs). As of June 2016, BBVA reported a cover pool of around Eu2.519bn, with the collateral score for the cover pool at 24.4%.

Overcollateralisation (OC) in the cover pool – based on an expected issuance of Eu1bn – is 151.9%, of which the issuer provides 42.9% on a committed basis, and exposure to market risk is 38.3%. The stressed level of losses on the cover pool assets following a covered bond anchor event transaction is 50.5%.

Moody’s also noted that the CIs’ rating is constrained by Spain’s country ceiling of Aa2. The Timely Payment Indicator (TPI) assigned is “improbable” and the TPI Leeway for the programme is zero notches.

The rating agency said its analysis also considered the robustness of the Spanish legal framework for CIs. The rating agency said the framework’s strengths include:

• That CI holders have a priority security claim over the issuer’s entire loan book linked to the financing of export of goods and services or to the internationalization of companies, and complying with certain eligibility criteria (excluding loans linked to bonos de internacionalización),

• A restriction on issuing CIs to a maximum of 70% of the cover pool, which provides for a minimum 42.9% OC for issuance purposes; and,

• That the issuer does not have to terminate or accelerate the CIs because of insolvency proceedings.

BBVA did not respond to enquiries before publication.

Market participants noted that BBVA may retain its issuance.

Spain in September 2013 laid the foundations for bonos de internacionalización, a pass-through version backed by a specific pool of loans. Santander is understood to have been the only bank to issue bonos de internacionalización, on a retained basis.

Please read an earlier article on interest in CIs and ECA-backed covered bonds.