Fitch Affirms Bradford & Bingley's Covered Bond Programme at 'AA+'; Stable Outlook
OREANDA-NEWS. Fitch Ratings has affirmed Bradford & Bingley's (B&B) mortgage covered bonds at 'AA+' with a Stable Outlook. There are currently GBP 2.3bn equivalent covered bonds outstanding. Of the four covered bond issues outstanding, two longer-dated issues are under a tender offer launched by B&B.
KEY RATING DRIVERS
The rating is based on the guarantee from HM Treasury (HMT) that is set to expire when B&B is completely wound down. As a result, the rating and Outlook on the covered bonds is directly linked to that of the United Kingdom sovereign (UK, AA+/Stable).
The guarantee extends until the maturity of the guaranteed debt. Fitch believes that even though there is no specific reference to the guarantee being unconditional and irrevocable, it would be extremely unlikely that the UK would assume any reputational or economic risk by failing to provide support if needed.
B&B has recently launched a tender offer for two longer dated covered bond issues, with one due in June 2017 and another in October 2018. Should the tender allow B&B to early redeem the two issues, there will be only two remaining outstanding covered bonds with the latest due in June 2016. This exercise is to accelerate the release of mortgage assets held in B&B's covered bond programme to allow future portfolio sales.
The rating of the covered bonds is sensitive to any rating movement of the Long-term IDR of the UK sovereign or to any material changes to the conditions of the guarantee granted by the UK government to B&B.