Moody’s Ratings has assigned a definitive Aaa long-term rating to Standard Chartered Bank (Singapore) Limited’s Series 3 mortgage covered bonds. The bonds, valued at €500m , are part of the bank’s $5b Global Covered Bond Programme and are due in 2029. This top-tier rating reflects the bank’s strong credit profile and the robust legal framework supporting the bonds.
The Series 3 mortgage covered bonds are backed by Singaporean residential mortgage loans, with a collateral score of 4. The bonds benefit from the issuer’s commitment to pay interest and principal, and in the event of a counterparty risk assessment (CB anchor) event, the economic benefit of a collateral pool. Moody’s noted that the stressed level of losses on the cover pool assets is 1.67%, with market risk accounting for 1.40% and collateral risk for 0.27%.
The legal framework includes a 12-month maturity extension to mitigate refinancing risk, and the overcollateralisation (OC) in the cover pool stands at 7.75%, with the issuer providing 1.62% on a committed basis. The timely payment indicator (TPI) for this transaction is rated as “Probable,” ensuring the likelihood of timely payments to bondholders.
Moody’s uses a two-step process for rating covered bonds, involving expected loss analysis and a TPI framework. The current TPI allows for a three-notch downgrade of the CB anchor before affecting the bond’s rating. Factors such as a downgrade of the CB anchor or a reduction in the cover pool’s value could lead to a downgrade of the bonds.
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