Westpac New Zealand Economic and Sustainability Strategy Update
Buffers to maintain covered bond ratings
The Covered Bonds currently benefit from a 3-notch buffer against downgrade of WNZL:
Minimum WNZL rating to maintain AAA/Aaa rating
on Covered Bonds:
Fitch: BBB+ (long-term ICR)
Moody's: A3(cr) (Counterparty Risk rating)
Even without the benefit of Group support
from WBC (+1 notch), there is still a 2-
notch buffer to the AAA/Aaa rating on the
Covered Bonds
Excess assets available to support outstanding Covered Bonds:
There is currently a significant buffer of assets in the
Covered Bond pool above the minimum required
levels to support the outstanding Covered Bonds:
-
Assets in pool in excess of outstanding
Covered Bonds: 90.9% (April 2021)³
Documented requirement: 11.1%
Rating Agency requirements: 9.3%4 (Fitch) /
8.2%5 (Moody's)
•
•
If WNZL's rating is downgraded by Moody's,
there are sufficient assets already in the
Covered Bond pool to continue to support
the Aaa rating (a 1-notch downgrade in (cr)
rating will result in an increase in the
Moody's requirement to 12.7%5)
Fitch's requirements are not expected to
change in response to any change in
WNZL's rating
Customary Covered Bond structural enhancements apply to protect Bondholders:
Ratings-based triggers in the documentation provide further protections to Bondholders upon downgrade of
WNZL. The documented triggers prescribe requirements for the funding of various reserves, replacement of
counterparties, and/or collateral posting requirements upon downside credit rating migration of WNZL
Westpac New Zealand Limited -
Ratings¹
Agency
Moody's
Fitch
Stand alone
rating
a3
a
Govt support
+1
Group support
+1
+1
Long-term ICR2
A1
A+
Counterparty
Risk Rating
(Moody's only)
Aa3(cr)
n/a
Short-term ICR²
P-1
F1
Outlook
Stable
Rating
Watch
Negative
1 As at 20 May 2021. Investors in WSNZL Covered Bonds should have regard to the risk factor titled, "WNZL could be adversely affected by the failure to maintain credit ratings" in the Prospectus dated 17 December 2020, as supplemented.
2 Issuer Credit Rating.
3 Assets of NZ$7.5bn supporting outstanding Covered Bonds of NZ$3.93bn (equiv.). Noting that a portion of these assets support the Demand Loan, which ranks senior in repayment to the Covered Bonds.
4 As at Jan 2021.
5 As at Dec 2019 (last disclosed).
16View entire presentation