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With Greece Bankrupt, Moody's Is Fully Awake Now, Takes "Negative Rating Action" On Greek Covered Bonds
Full Release:
Moody's takes negative rating actions on Greek covered bonds
Mortgage covered bonds of Alpha Bank, EFG Eurobank and National Bank of Greece negatively impacted
London, 26 April 2010 -- Moody's Investors Service has taken the following rating actions on covered bonds issued by Greek banks:
- Mortgage covered bonds issued by National Bank of Greece S.A. ("NBG"): Downgraded to Aa2 and placed on review for further downgrade; previously on 31 March 2010 downgraded to Aa1;
- Mortgage covered bonds issued by Alpha Bank S.A. ("Alpha"): Aa2 placed on review for possible downgrade; Previously on 31 March 2010 downgraded to Aa2;
- Mortgage covered bonds issued by EFG Eurobank Ergasias S.A. ("EFG Eurobank"): Aa2 placed on review for possible downgrade; previously on 31 March 2010 confirmed at Aa2.
These rating actions on the covered bonds were prompted by Moody's rating actions on each of the respective issuer's senior unsecured rating as follows:
- NBG: Downgraded to A3 and placed on review for further downgrade on 23 April 2010;
- Alpha: A3 placed on review for possible downgrade on 23 April 2010;
- EFG Eurobank: A3 placed on review for possible downgrade on 23 April 2010.
The rating actions on the banks were prompted by the downgrade and review for further downgrade of Greece's sovereign ratings (see press release "Moody's downgrades Greece's sovereign ratings to A3; on review for further possible downgrade" dated 22 April 2010 for further details on the rating action on Greece and press release "Moody's to review six Greek banks for possible downgrade" dated 23 April 2010 for the rating actions on the banks).
In the case of NBG, the combination of an issuer rating of A2 and a Timely Payment Indicator (TPI) of "Improbable" assigned to the covered bond programme now cap the covered bond ratings at Aa2. In addition, the covered bond ratings for all three banks have been placed on review for downgrade as their senior unsecured ratings are on review for downgrade.
Given the current TPIs on the covered bonds, if any of these banks face downgrades of their senior unsecured ratings, the ratings of the covered bonds will be downgraded under Moody's TPI framework. Moody's has assigned TPIs of "Very Improbable" to EFG Eurobank's covered bonds and "Improbable" to both Alpha's and NBG's covered bonds. These TPIs are unchanged by this rating action.
In addition to the TPI restrictions, there is also negative rating pressure on the covered bonds under Moody's expected loss methodology coming from two sources: i) as the credit strength of the issuer is incorporated into Moody's expected loss methodology, any downgrade of the issuer's ratings will, other things being equal, increase the expected loss on the covered bonds; and ii) as sovereign risk is captured in Moody's rating approach, a lower sovereign rating may increase loss assumptions used for modelling (see also press release "Greek structured finance deals can achieve Aaa ratings, subject to certain conditions" dated 29 March 2010). Moody's notes that issuers may be able to offset any deterioration in the expected loss analysis by adding further collateral to their programmes.
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When they get to B (or at least sub-investment grade), they will be on the right track. Alas, that won't happen - they will go from A to D about a week after Greece officially defaults. Good job Moodys!
I guess, for Moodys, B means absolutely broke. Nice rating system, clowns.
+1, here, let me help out the casual reader:
Moody judges obligations rated Aa to be high quality, with "very low credit risk". (What morons!)
Moodys should stick to bra sizing.....
Their alphabet would then be of some use.
:) And they should use pics for their ratings!
Munchau of the Financial Times has this great line:
"Greece will need to present a transition programme that explains how a large primary deficit can be turned into an equally large primary surplus without causing a slump in economic growth"
Translation: "once Greece learns how to spin straw into gold there will be a mob of western states seeking to implement this wondrous new Greek economic model."
what a joke they are
how can a country on the eve of deafault be considered an A
surely its J for junk
What an amazing business model: custom tailored, laddered pricing ratings and hindsight ratings changes!
I am awestruck by the audacity of this rating agency's move.
It's probably time to stop the fascination with Greece. Default, bankruptcy, credit downgrades - it doesn't matter. Again, it's an isolated incident which, as we've seen, has not spread and caused the domino affect that so many here "hoped" it would. Time to focus on US prospects and problems of which there are many on both sides to discuss.
OK, Harry,
Let me see if I've got this straight.
The US currently has the highest debt-to-GDP ratio since 1945.
In 1945, consumer debt was very low, now it is very high.
In 1945, manufacturing was 33% of GDP, now it is 9%.
In 1945, the US was the world's biggest exporter, now we are the biggest importer.
In 1945, the US govt. was taking action to reduce the debt while now we are increasing it.
In 1945, the US was on the gold standard while now we are on the paper monetization standard.
I don't think anyone here is "hoping" that Greece will cause a contagion effect.
We're just trying to find truth in spite of the Progressive Socialist Mainstream Media.
I seem to recall times when "Lehman Bros." and "subprime" were also "contained" and "isolated."
Well, the topic of the overall post is Greece, which is why we aren't focusing on US issues here.
Also, not so sure this show is over yet. The other PIIS spreads have markedly increased over the past week. If Greece "restructures", I suspect the remaining PIIS will fall with startling speed.
Please folks leave Harry alone. A little discipline is required.
Looks like the liberal spin has made to ZEROHEDGE hey Harry Wanger? Again typical liberal diversion tactic to pint in other directions when there is fire.
Harry's comment made no sense, but neither did reading it as 'liberal.' The two of you deserve each other.
Moody's execs have a hankering for some baklava, and are attempting to get another Greece-paid junket. It's as simple as that.
I give Greece a triple-omega minus rating: Ω Ω Ω -
harry again will probably be right
unbelievable as it is
This bear capitulates
Right on time Moody's!
Moody's: like a dragon - slow to wake, but hard to sate.
Weird. You miss one credit card payment and every insurance company, mortgage holder, etc etc is instantly notified and you are gang raped by the FICO dragon. A country starts missing payments and it takes a week before they downgrade them.
I guess it's all part of the game. Game the debt load build it up and then crush them with responses.
Exactly when is greece going to wake up and default ENTIRELY and issue it's old currency back again?
The bigger you are, the less all those rules apply to you.
How in the world, is EURO not sunken into oblivion is beyond me. Who is propping that crap up right now? It has to be government done, no other explanation. Well like they say, Prop it till you drop!!!!
LOL look at the one minute chart for today on EUR/USD. It drops straight down for about an hour, then in 15 seconds pumped right back up to where it was the previous hour all day long. Nah, this isn't anyone manipulating anything right???? Its laughable, these crooks don't even try to hide what they are doing anymore, because there is no penalty.
Deep Shah.
I'm downgrading moodys.