Bad news for Greece.
Moody’s, the only rating agency that still has Greece at the A level, has just placed almost every single triple-A rated Greek structured finance and covered bond deal on review for a downgrade.
From the release:
Paris, February 19, 2010 — Moody’s Investors Service today placed the Aaa ratings of all except one Greek ABS, RMBS, CLO and covered bond transactions under review for possible downgrade. A complete list of affected transactions is at the end of this press release. The affected transactions include nine ABS, eleven RMBS, two CLO and one covered bond programme which are all backed by pools of Greek assets. There is no Greek CMBS rated by Moody’s.
Today’s rating actions result from an initial assessment of these highly rated Greek structured finance and covered bond transactions within the context of the evolving sovereign situation as well as the current economic and financial environment. This included a consideration of the existing credit enhancement levels because, in the event of the local economy coming under further stress, the default probability of the assets in the underlying pools may potentially increase. In addition certain deals are also exposed to both refinancing risk and local banks.
Moody’s already announced on February 4 that it was undertaking a review of Greek structured finance ratings. The covered bond bit is interesting though, since it looks like sovereign jitters are increasingly feeding into the ratings of the on-balance-sheet bonds.
Oh — and for those curious about what just might end up being the last Moody’s AAA-rated Greek deal:
Moody’s notes that in one transaction, Karta 2005 plc, a credit card ABS transaction, the Aaa rating of the Class A notes has not been affected as it benefits from structural elements. This transaction has entered into a cash accumulation period (during which all proceeds are kept in cash rather than reinvested in assets) and the Class A notes are currently cash collateralised at 91.4% with cash held with a highly rated bank (Deutsche Bank, London Branch) located in the UK. In view of the very high degree of certainty of repayment of these notes with funds already collected by Karta APC Ltd , Moody’s has concluded that the credit risk of these notes remains consistent with a Aaa rating.
Update: There’s also been a rash of Greek structured finance downgrades by Standard & Poor’s on Friday. The agency cut its ratings on all triple-A rated Greek securitisation tranches to ‘AA’ because of Greek “country risk.” Unlike Moody’s, S&P already has Greece at BBB+.
Related links:
S&P’s sovereign-covered caution – FT Alphaville
Covered bond bailouts – FT Alphaville
Next up for Europe, covered bond catastrophe – FT Alphaville
There goes the δομημένη χρηματοδότηση… - FT Alphaville