US ratings agency Standard & Poor's (S & P) has assigned an A rating to Standard Chartered Bank's $900 million mortgage-backed securities (MBS) issue and says it is stepping up its local coverage of such deals.
S & P representatives are in Hong Kong this week to address a conference and present a report specifically addressing the Hong Kong MBS market.
'What we're doing this week is putting in print the criteria and the approach that we're adopting in rating specifically residential mortgage-backed securities in Hong Kong,' said Chris Dalton, S & P's director for structured finance in Australia, who also released a statement on Standard Chartered's MBS.
MBS issues involve pooling mortgages and then issuing floating-rate or fixed-rate debt securities, backed by the interest and principal payments on the underlying mortgages.
The agency's A rating of Standard Chartered's issue - billed as a 'mortgage asset receivables securitisation (MARS)' - was constrained by S & P's rating of the Hong Kong Government itself, Mr Dalton said.
'The rating is dependent upon and therefore constrained by S & P's sovereign rating of Hong Kong,' Mr Dalton said, adding that it could be 'adversely affected by a deterioration of the Hong Kong sovereign rating assigned by S & P.' S & P at present rates Hong Kong A-plus for long-term local currency, A for long-term foreign currency and A1 for short-term.
'The rating reflects the underwriting standards of Standard Chartered Bank of the mortgage loans, the seasoned nature of the loans in the pool, the subordination of the class B notes which represent 10 per cent of the mortgage pool and also of the total notes issued,' Mr Dalton said.