Standard & Poor’s placed AAA public sector covered bonds issued by Eurohypo on CreditWatch negative on Thursday after the issuer was put on negative review.

The A- rating of Eurohypo was put on CreditWatch negative after parent bank Commerzbank’s A rating was put on review for downgrade. S&P’s review of Commerzbank was initiated after Germany’s AAA rating was put on Credit Watch with negative implications in December.

Eurohypo’s covered bonds have a maximum potential uplift of six notches above the issuer because they are assigned to Category 1 under S&P’s methodology and have been given an asset liability mismatch (ALMM) classification of “moderate”, and that any downgrade of Eurohypo would directly affect the covered bonds. S&P said that it expects the ALMM risk to remain “moderate”.

All other factors being equal, a downgrade of the issuer or a downgrade of the covered bonds will not affect the target credit enhancement level that S&P deems commensurate to support the covered bond ratings, it said.

S&P said that it aims to resolve the review shortly after that of Eurohypo’s issuer rating and that, based on updated credit and cashflow information, it expects either an affirmation or lowering of the rating by one notch or more.