Moody’s downgraded the aircraft Pfandbriefe of NordLB to A3 today (Wednesday), following a downgrade of the issuer. The mortgage and public sector Pfandbriefe of NordLB and its subsidiary Deutsche Hypo remain on review for downgrade.

On Friday, Moody’s downgraded NordLB and Deutsche Hypo from Baa1 to Baa2 and lowered the banks’ counterparty risk (CR) assessments from Baa1 to Baa2, among other rating actions.

It said the downgrades reflect its view that the success of measures taken by NordLB to de-risk the bank and stabilise its capitalisation depends to a significant degree on the future development of shipping markets to which it is exposed.

“While NordLB made adequate progress in its de-risking program, supported by a less adverse shipping market environment than in 2016, we believe that the bank will only gradually rebuild a sufficient degree of resilience against adverse ship market value and freight rates scenarios, leaving it significantly exposed to solvency risks within the next 12 to 18 months,” said Bernhard Held, senior analyst at Moody’s.

The rating agency subsequently downgraded NordLB’s aircraft Pfandbriefe from A2 to A3 this morning. Moody’s expected loss analysis restricts the Pfandbriefe rating to one notch above the covered bond anchor.

Moody’s said the mortgage and public sector Pfandbriefe of NordLB Deutsche Hypo remain under review, adding that it will consider the level of overcollateralisation (OC), including OC in committed form, that is expected for each programme.