Moody's assigned LHV mortgage covered bonds a provisional rating of (P)Aa1
Moody's Investors Service has assigned a provisional (P)Aa1 long-term rating to the mortgage covered bonds issued by AS LHV Pank.
The international credit ratings agency Moody’s has analysed the planned issue of covered bonds by LHV Pank and considered, inter alia, the high credit quality of the assets backing the covered bonds, the support provided by the Estonian legal framework, which provides for the issuer's regulation and supervision, but also exposure to market risks and the increased uncertainty of the current economic environment. The long-term rating (P)Aa1 indicates high quality obligations that are subject to very low credit risk.
"Obtaining a credit rating is an important step in order to continue the preparations for the bond issue as planned and although the final date is subject to the market situation, we plan to issue the covered bonds in early summer," said Erki Kilu, the chairman of the management board of LHV Pank. "LHV has always maintained a conservative position regarding liquidity management and covered bonds offer an opportunity to further diversify funding and reduce costs. The cost of more expensive deposits, raised through deposit platforms, can be reduced by issuing covered bonds that are secured by residential mortgages. In the long run, this will also lead to more favourable cost of financing for our clients," Kilu added.
LHV Pank is planning to offer covered bonds to European institutional investors.
Covered bonds are expected to provide a new resilient source of funding for LHV. Covered bonds also provide LHV with the opportunity to use liquidity offers from the European Central Bank.
On the proposal of the Estonian Financial Supervision Authority, AS LHV Pank was granted an authorisation by the ECB to issue covered bonds on 18 March 2020. The legislation enabling the issuance of covered bonds under the Estonian Covered Bonds Act entered into force in Estonia in March 2019.
LHV began issuing home loans in 2016. With the acquisition of the private customer loan portfolio of Danske Bank A/S Estonia branch in 2019, LHV achieved a sufficient volume of mortgages for issuing covered bonds.
LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group’s key subsidiaries are LHV Pank and the asset management company LHV Varahaldus. LHV employs over 450 people. LHV’s banking services are used by nearly 217,000 clients, and pension funds managed by LHV have nearly 178,000 active clients.
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