Business World

Sunday 17 December 2017

Moody's eyeing mortgage bonds for downgrade

Donal O'Donovan

THE final six top-rated Irish bonds backed by bundles of home loans were placed under review for a possible downgrade last night by ratings agency Moody's.

The agency said the top "AAA" rating is becoming unrealistic for any such Irish bond deals.

The bonds backed by home loans are known as asset backed securities (ABS).

They are used by banks to borrow in the market and are backed by large numbers of residential mortgages.

The ABS deals placed under review include deals for Ulster Bank and Irish Life & Permanent.

Moody's analysts said: "Moody's no longer views Aaa ratings as achievable for Irish structured finance deals except, for example, those with very short remaining maturities."

The six deals being placed under review are the last Irish ABS bonds still ranked AAA.


As well as using the ABS deals for conventional borrowing, banks have been able to use the assets as collateral for loans including from the European Central Bank.

If the ratings are downgraded those loans will be also be even harder to come by.

Moody's also said it was placing the subordinated bonds of Bank of Ireland, Irish Life & Permanent and AIB under review for possible downgrade.

It will also review its "bank financial strength rating" for EBS.

Subordinated bonds are high risk loans made to banks and companies.

The review by Moody's comes after their holders were warned of possible losses when the government puts new money into the banks.

The bank financial strength rating is a measure of the risk of doing business with an institution.

Irish Independent

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