Moody’s today (Friday) upgraded to Aaa public sector Pfandbriefe (OePfe) that Commerzbank in May took over from Hypothekenbank Frankfurt – the former Eurohypo – and affirmed at Aaa the outstanding Commerzbank covered bonds backed by the cover pool that the ex-Eurohypo issuance was merged into.

Commerzbank in mid-May transferred mortgage and public sector cover assets and Pfandbriefe of subsidiary Hypothekenbank Frankfurt into its own cover pools. Analysts at the time suggested that this could result in a downgrade of Commerzbank’s outstanding triple-A rated public sector Pfandbriefe because the public sector cover pool of Hypothekenbank Frankfurt was considered lower quality – its public sector Pfandbriefe (Öffentliche Pfandbriefe, or Oepfe) were rated Aa1. Commerzbank said, upon announcing the merger, that it was “aspiring to a solid rating of at least AA” for the public sector Pfandbriefe.

On 8 June Fitch downgraded Commerzbank public sector Pfandbriefe from AAA to AA (it did not rate the Hypothekenbank Frankfurt public sector Pfandbriefe), and left them on Rating Watch Negative pending receipt of further cover pool data.

However, Moody’s this morning upgraded the Aa1 former Hypothekenbank Frankfurt, now Commerzbank public sector Pfandbriefe to Aaa and affirmed those issued by Commerzbank before the cover pool merger, after having had the latter under review for downgrade.

The rating agency had said it would monitor the overcollateralisation (OC) in the programme and today noted that as of 30 June, the present value OC of the merged programme has increased to 9.7% while OC consistent with the Aaa rating is 7.0%.

“Further, Commerzbank has indicated an intention to maintain 7.0% OC on a present value basis,” said Moody’s.