Moody’s downgraded mortgage and public sector covered bonds of Banco Popular Español three notches to A2 yesterday (Monday) following a downgrade of the Spanish issuer upon “heightened concerns” over its creditworthiness, shortly after a downgrade of the mortgage programme by DBRS.

On Friday Moody’s downgraded Banco Popular Español from Ba2 to B1 with a negative outlook, and subsequently downgraded its Counterparty Risk (CR) assessment from Baa2 to Baa3.

The rating actions came after Popular announced on 3 April that it will need to carry out a revision of its 2016 results that will affect its capital, and, Moody’s said, reflect the rating agency’s “heightened concerns regarding Banco Popular’s creditworthiness, namely its weakened solvency levels, which are rapidly deteriorating against the background of still very significant asset quality challenges”.

Moody’s then downgraded Popular’s mortgage and public sector covered bond programmes from Aa2 to A2 yesterday afternoon.

As a result of the cut to the CR assessment, the covered bond anchor for the programmes is two notches lower. The programmes’ Timely Payment Indicator (TPI) of “probable” now restricts the rating of the covered bonds at A2.

DBRS downgraded the mortgage covered bonds (cédulas hipotecarias) of Banco Popular Español, and those of subsidiary Banco Pastor, from AA to AA (low) on 14 April. The downgrades also came as a result of a downgrade of Popular.