Moody’s cut mortgage covered bonds issued by BBK Bank Cajasur from A3 to Baa2 yesterday (Tuesday) as a result of a review of the Spanish issuer’s creditworthiness, noting that the cédulas do not benefit from any explicit guarantee of support from the parent Kutxabank group.

The downgrade followed a review of BBK Bank Cajasur’s creditworthiness, as a result of which Moody’s assigned a new unpublished senior unsecured rating to the issuer. In the absence of the Timely Payment Indicator (TPI) having changed, this would imply that Moody’s considers the issuer’s creditworthiness to have declined.

BBK Bank Cajasur is the successor of Caja de Ahorros y Monte de Piedad de Córdoba and, as a result of the merger of three Basque savings banks in January, forms part of Kutxabank. Moody’s said that it took into account the integration of the issuer within the parent banking group as part of its analysis, but noted that BBK Bank Cajasur’s cédulas do not benefit from any explicit guarantee of parental support.

Moody’s said that a TPI of “improbable” constrains BBK Bank Cajasur’s cédulas rating at the current level, and that any downgrade of the issuer may lead to a downgrade of the covered bonds.

In the event of a BBK Bank Cajasur default, Moody’s estimates cover pool losses of 44.6%, split between market risk of 24.1% and collateral risk of 20.5%, the latter derived from a collateral score of 30.6%. The cover pool overcollateralisation is 161%, but only 25% is on a committed basis. As the minimum OC level consistent with the Baa2 target rating is 38.5%, Moody’s needs to rely on uncommitted OC for its analysis.