Fitch Expects to Rate BA Covered Bond Issuer US Covered Bonds 'AAA'.LONDON & NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has today assigned BA Covered Bond Issuer ('BACBI') Series 3 covered bonds an expected rating of 'AAA'. These securities will be issued under BACBI's EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 20bn covered bonds programme. The bonds will have a size of up to EUR5bn, with an expected maturity between three and 15 years. The final rating is contingent on the receipt of final documents conforming to information already received. In the absence of dedicated legislation for covered bonds in the US, the programme rests on contractual agreements and the pledge of assets under the US Uniform Commercial Code. The issuer is a Delaware statutory trust specifically established for the covered bonds programme while the sponsor of the programme is Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. NA. ('BANA', rated 'AA'/'F1+'), one of the largest US mortgage lenders. Under this programme, BANA will issue floating-rate, USD-denominated US mortgage bonds secured on a portfolio of residential mortgage loans originated or acquired by its branch network. The mortgage bonds will be direct and unconditional obligations of BANA, ranking pari passu [Latin, By an equal progress; equably; ratably; without preference.] Used especially to describe creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other. PARI PASSU. By the same gradation. and without priority among themselves. Each series of mortgage bonds will be purchased by BACBI, which will finance this acquisition through the issuance of contractual covered bonds. USD-denominated proceeds from the mortgage bonds will be swapped in exchange for interest and principal due under the covered bonds in the relevant currency. The programme is designed to protect covered bondholders against the risk that, in an insolvency of BANA, the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. ('FDIC') elects to accelerate the bank's obligations. The expected rating is based on the programme's satisfactory legal structure, the credit quality of the cover pool and the liquidity of the US mortgage loans market. The rating considers the availability of sufficient over-collateralisation to absorb potential credit losses and the hedging mechanisms in place to offset market risks. In May 2007, the cover pool segregated in favour of the mortgage bondholder consisted of 33,300 performing hybrid adjustable-rate mortgage Adjustable-rate mortgage (ARM) A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or loans and fixed-rate mortgage loans secured on residential properties, with a total outstanding balance of approximately USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 17.7bn. The portfolio has a weighted average ('WA') original loan-to-value ratio Loan-to-value ratio (LTV) The ratio of money borrowed on a property to the property's fair market value. ('LTV') of 65.9%, a WA FICO score of 743 and an average 20-month seasoning. The pool is highly concentrated in California (42.16%) and the top five states account for more than 65% of the portfolio. The cover pool is dynamic and can change over time. The main risk for covered bond investors lies in the market value of the pledged mortgage loans. In the event of an acceleration of the mortgage bonds, the trustee will have to liquidate the entire pool within a tight timeframe. USD proceeds from the pool disposal will be invested in specified instruments in favor of covered bondholders. The covered bonds will not accelerate as a result of a default on the mortgage bonds, rather they will keep being paid out of the cashflows generated by the specified instruments. A swap will hedge against interest rate and currency risk as well as the potential negative carry associated with holding funds in the specified instruments. Fitch assessed, in its cashflow analysis, the stressed price at which the pool could be sold or securitised by the trustee in a particularly severe economic environment. The agency has taken into account numerous assumptions in respect of, among others, the cost of funding for a potential buyer under an 'AAA' stress scenario. A dynamic asset coverage test ('ACT') is calculated to ensure that sufficient overcollateralisation is available to provide full repayment of the mortgage bonds in a 'AAA' stress scenario. Currently the asset percentage stands at 93%, which provides 7% credit enhancement to investors. However, this will be adjusted up or down; subject to a maximum of 96%, depending on Fitch's stressed market value assessment and the result of an asset percentage calculation, which is part of the ACT. The ACT only gives credit to the portion of the underlying mortgages up to 75% LTV LTV See: Loan-to-value ratio , unless they are protected by mortgage insurance. The presale report for the issuance is available at www.fitchratings.com. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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