Outlook On Danmarks Skibskredit's Two Danish Ship Covered Bond Programs Revised To Stable; 'A' Ratings Affirmed

  • On Aug. 14, 2019, we revised the outlook on Danmarks Skibskredit to stable from negative to reflect the bank's reduced exposure to nonperforming assets and strong capitalization.
  • As a result, we are revising to stable from negative the outlook on Danmarks Skibskredit's Danish ship covered bond programs, and affirming our 'A' ratings on the programs and the related issuances.
  • The stable outlook mirrors the outlook on the bank.
MADRID (S&P Global Ratings) Sept. 2, 2019--S&P Global Ratings today revised to stable from negative the outlook on Danmarks Skibskredit A/S' Capital Center General and Capital Center A Danish ship covered bond programs. At the same time, we affirmed our 'A' ratings on the covered bonds and the related issuances.
The outlook revision follows the similar action taken on the issuer on Aug. 14, 2019 (see "Danmarks Skibskredit Outlook Now Stable On The Improving Credit Quality Of Its Loan Book; 'BBB+/A-2' Ratings Affirmed," on RatingsDirect).
Our 'A' ratings on the Capital Center A and Capital Center General ship covered bond programs and related issuances reflect our reference rating level (RRL) of 'a-' plus a one-notch uplift. As Danmarks Skibskredit is exempt from bail in and we consider the systemic importance of ship covered bonds in Denmark to be moderate, we assign one resolution support uplift notch to the issuer credit rating (ICR) on the bank to get the 'a-' RRL.
We analyze jurisdictional support under our covered bonds criteria to determine the jurisdiction-supported rating level (JRL). We consider shipping covered bonds in Denmark to benefit from moderate jurisdictional support, allowing for one additional notch of uplift from the RRL to achieve a JRL of 'a' (see "Assessments For Jurisdictional Support According To Our Covered Bonds Criteria," published on Oct. 16, 2018).
Our ratings currently do not reflect any collateral-based uplift because the replacement framework in the counterparty documentation is not in line with our counterparty criteria. Therefore, under these criteria, our ratings on the covered bond programs are constrained by our counterparty criteria at 'A', which reflects the RRL plus one notch (see "Counterparty Risk Framework: Methodology And Assumptions," published on March 8, 2019). Our counterparty criteria states that for programs with derivative agreements with unrelated counterparties (which is the case for this program) and with documentation not in line with our criteria, the ratings will be capped at the RRL plus one notch.
The stable outlook on the ratings reflects the outlook on Danmarks Skibskredit and that any rating action on the issuer will result in a rating action on the covered bonds.
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