Fitch cut Barclays Bank public sector covered bonds from AAA to AA+ on Friday, a week after it downgraded the UK sovereign, with the issuer having removed references to Fitch in the documentation of the programme after they were put on review.

The covered bonds are backed by exposures to UK local authorities, whose creditworthiness would be “materially affected” by a theoretical sovereign default, said the rating agency. It said that the overcollateralisation of the covered bonds does not provide for high enough recoveries on defaulted covered bonds to support a triple-A rating.

Fitch cut the UK sovereign from AAA to AA+ on Friday, 19 April. A day earlier Barclays issued a notice to bondholders saying that the transaction parties had entered into a global deed of amendment to modify the transaction documents to remove Fitch from the transaction. (See previous coverage here).