In assigning the rating to Westpac’s Series 2015-C5 mortgage bonds, Moody’s said the credit quality of the assets backing the covered bonds was a significant factor.
“The covered bonds are backed by Australian residential mortgage loans. The collateral score for the cover pool is 6.34 per cent,” the credit ratings agency said.
Moody’s said the legal framework of Westpac’s mortgage-covered bond program, as well as the cover pool’s exposure to market risk – which is 16.21 per cent – were also taken into account.
“As at 30 April 2015, the total value of the assets included in the cover pool is $35.0 billion, comprising $34.1 billion in residential mortgage loans and $0.9 billion in substitute assets,” it said.
“The residential mortgage loans have a weighted-average (WA) seasoning of 55 months and a WA current unindexed loan-to-value ratio of 61.3 per cent.”
Moody’s said its rating addresses the expected loss posed to investors, which is 20.5 per cent for the cover pool.
The ratings agency added that a change in the level of the covered bond “anchor” – the probability that an issuer will cease making payments under the covered bonds – could lead to a downgrade in the rating of the covered bonds.