DBRS has rated mortgage covered bonds issued by Banco Espírito Santo (BES) A (low), taking the number of European covered bond programmes it has rated to five, all of them in Portugal.

The rating agency has since December rated covered bonds programmes of Caixa Económica Montepio Geral, Banco Santander Totta, and Banco Comercial Português and subsidiary Banco de Investimento Imobiliário. All were rated A (low) apart from Santander Totta’s, which were rated A (high).

DBRS said its rating of BES’s obrigações hipotecárias took into account:

• The covered bonds are senior unsecured direct deposit obligations of BES, which is rated BBB (low) with a negative trend by DBRS
• Portuguese covered bond laws, which in the case of an issuer insolvency give the holders of the covered bonds recourse to the cover pool in priority to other creditors
• DBRS legal and structuring framework assessment of “adequate”
• Issuer commitment overcollateralisation level of 15%
• BES’ capabilities with respect to origination of cover pool assets and servicing of the cover pool
• The financial strength of the swap counterparty to meet its obligations pursuant to the liability swaps
• The credit quality of the collateral and structural features of the programme (extendable maturity, collateral eligibility criteria, and interest rate derivatives)