OREANDA-NEWS. Fitch Ratings has assigned Westpac New Zealand's (WNZL, AA-/Stable/F1+) Series 2015-1 EUR500m mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. Series 2015-1 has been issued through Westpac Securities NZ Limited, London Branch, a guaranteed issuing vehicle used for international funding by WNZL.

This brings the total outstanding issuance of the programme to NZD3.8bn. The fixed-rate bond is due in September 2020, and benefits from a 12-month extendable maturity.

KEY RATING DRIVERS
The rating is based on WNZL's Long-Term Issuer Default Rating (IDR) of 'AA-', a Discontinuity Cap (D-Cap) of 2, and an asset percentage (AP) of 86.5%, which is equivalent to Fitch's break-even AP. This supports a tested rating of 'AA' on a probability of default (PD) basis, and a 'AAA' rating after giving credit for recoveries. The Outlook on the covered bonds reflects the Stable Outlook on WNZL's IDR.

Maturity mismatches are significant, with the weighted-average residual life of the assets at 14 years and the liabilities at 2.7 years.

RATING SENSITIVITIES
The 'AAA' rating would be vulnerable to downgrade if any of the following occurred: (i) WNZL's IDR was downgraded by two notches to 'A'; or (ii) the D-Cap falls by two categories to 0 (full discontinuity); or (iii) the asset percentage (AP) that Fitch takes into account in its analysis increased above Fitch's 'AAA' breakeven AP of 86.5%.

Fitch's 'AAA' breakeven AP for the covered bond rating will be affected, among others, by the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the 'AAA' break-even AP to maintain the covered bond rating cannot be assumed to remain stable over time.