Midgard Prosjekt I ASA (to be renamed Skandiabanken Boligkreditt) plans to offer NOK17 million ($2.05 million) of covered bonds backed by a NOK13 billion pool of Norwegian residential mortgages, according to Moody’s Investors Service.

Moody’s assigned preliminary ‘Aaa’ ratings to the covered bonds.

Skandiabanken Boligkreditt (Skandia-BOL) was set up to take over the Norwegian business of Swedish bank Skandiabanken AB. It is a wholly owned subsidiary of Skandiabanken ASA.

Following the transaction, Skandiabanken will only conduct banking business in Sweden, while Skandia-BOL will continue the banking business in Norway.  Skandia-BOL’s covered bonds will not have recourse to Skandiabanken AB or its Swedish cover pool.  

The covered bonds’ rating is linked to the credit strength of the issuer’s parent company, mainly because the parent will establish a revolving credit facility for the benefit of the issuer, according to presale report.

All of the mortgage loans are performing as of the reporting date.

In line with Norwegian market standards, all loans in the cover pool are floating rate. Mortgages in the pool have a shorter payment history of three years relative the majority of Norwegian covered bond programs, according to Moody’s. This is partly due to becasue of the issuer’s strong loan origination activity in the past few years.  However, the short payment history is mitugated by Skandiabanken’s loan underwriting criteria, which is in line with Norwegian market standards.

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