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Fitch Affirms Bradford & Bingley's Covered Bonds at 'AA+'; Stable Outlook
February 12, 2015 / 10:03 AM / 3 years ago

Fitch Affirms Bradford & Bingley's Covered Bonds at 'AA+'; Stable Outlook

(The following statement was released by the rating agency) LONDON, February 12 (Fitch) Fitch Ratings has affirmed Bradford & Bingley's (B&B) mortgage covered bonds at 'AA+'. The Outlook is Stable. There are currently GBP2.3bn equivalent covered bonds outstanding, with the longest maturing in 2018. KEY RATING DRIVERS B&B's mortgage covered bonds 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 of the covered bonds is directly linked to that of the UK sovereign (AA+/Stable). The Stable Outlook on the UK's Long-Term IDR drives the Stable Outlook on B&B's covered bonds. 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 irrecoverable, it would be extremely unlikely that the UK would assume any reputational or economic risk by failing to provide support if needed. The guarantee states that for secured obligations, HMT will guarantee the payment obligations of B&B to the extent that these obligations exceed the available proceeds of the realised security for the relevant derivative or borrowing. Fitch deems that timely payment of covered bonds is highly likely given that the overall aim of UK Asset Resolution Limited (UKAR, wholly owned by HMT) is to maximise value for tax-payer. A missed payment on the covered bonds can trigger acceleration of all outstanding covered bonds and sale of assets, which is not considered to be in line with the objective of UKAR to protect and optimise the balance sheet of B&B. RATING SENSITIVITIES The rating of the covered bonds is sensitive to any rating movement of the UK sovereign Long-Term IDR or to any material changes to the conditions of the guarantee granted by the UK government to B&B. The latter scenario is deemed unlikely by Fitch given that HMT has a strong incentive to orderly wind-down B&B in order to maximise the repayment of the government funding. More details on Fitch's analysis will be available in a credit update report, which will shortly be available at Contact: Primary Analyst Kate Lin Director +44 20 3530 1706 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Justina Niu Analyst +44 20 3530 1589 Committee Chairperson Cosme de Montpellier Senior Director +44 20 3530 1407 Media Relations: Christian Giesen, Frankfurt am Main, Tel: +49 69 768076 232, Email: Additional information is available at Applicable criteria, Covered Bonds Rating Criteria, dated 8 August 2014 are available at Applicable Criteria and Related Research: Covered Bonds Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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