Press Release

DBRS Morningstar Assigns AA (high) Credit Rating to Caixa Geral De Depósitos S.A. Covered Bonds (Obrigações Cobertas - Mortgages) Series 19

Covered Bonds

December 13, 2023

DBRS Ratings GmbH (DBRS Morningstar) assigned a AA (high) credit rating to the Series 19 Obrigações Cobertas (formerly designated Obrigações Hipotecárias; the Portuguese legislative covered bonds) issued under Caixa Geral de Depósitos, S.A.’s (CGD or the Issuer) covered bond programme (the programme).

Series 19 is a EUR 2.0 billion floating-rate bond that pays a coupon of 55 basis points over three-month Euribor. The bond matures on 12 June 2030.

Following the issuance of Series 19, there are three series of covered bonds (CBs) outstanding under the programme, totalling a nominal amount of EUR 5.0 billion. All CBs issued under the programme rank pari passu with each other and DBRS Morningstar currently rates them AA (high).

The credit rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of “A”, which is CGD’s Long Term Critical Obligations Rating. CGD is the Issuer and the Reference Entity (RE) for the programme. DBRS Morningstar considers Portugal a jurisdiction for which CBs are a particularly important financing tool and the assets in the programme to be strategic to the RE’s core activity.
-- A Legal and Structuring Framework (LSF) Assessment of “Strong” associated with the programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB, which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA (low).
-- A two-notch uplift for high recovery prospects.
-- A committed minimum overcollateralisation (OC) of 28%. DBRS Morningstar gives full credit to such commitment in accordance with its principal methodology. Such level is not subject to a haircut as DBRS Morningstar considers it to be persistent based on historically observed levels.
-- The sovereign credit rating on the Republic of Portugal, rated “A” with a Stable trend by DBRS Morningstar as of the date of this press release.

DBRS Morningstar analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the cover pool (CP).

Everything else being equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB credit ratings.

In addition, all else unchanged, the CB credit ratings would be downgraded if any of the following occurred: (1) the sovereign credit rating on the Republic of Portugal were downgraded below A (low); (2) the CPCA were downgraded below BBB; (3) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (4) the relative amortisation profile of the CBs and CP moved adversely; (5) the LSF Assessment associated with the programme were downgraded to Average or below; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

For further information on the programme, please refer to the rating report at www.dbrsmorningstar.com.

DBRS Morningstar’s credit rating on Series 19 addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for Series 19 are the related interest payment amounts and the related principal balance.

DBRS Morningstar’s credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Credit rating actions on the Issuer are likely to have an impact on this credit rating.

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/416784.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is: “Global Methodology for Rating and Monitoring Covered Bonds” (8 May 2023), https://www.dbrsmorningstar.com/research/413651.

Other methodologies referenced in this transaction are listed at the end of this press release.

In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.

A review of the transaction legal documents was limited to the final terms of Series 19.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/421590.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The sources of data and information used for this credit rating include investor reports provided by the Issuer.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing this credit rating to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

This credit rating concerns a newly issued financial instrument. This is the first DBRS Morningstar credit rating on this financial instrument.

The last credit rating action on this transaction took place on 5 December 2023, when DBRS Morningstar confirmed its AA (high) credit ratings on the CBs outstanding under the programme.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Marcos Meier, Senior Analyst
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 10 September 2012

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27 28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

Download This Press Release