- Conditional pass-through and soft bullet covered
bond formats are growing in popularity among European
issuers, following landmark deals by Commerzbank in February
and NIBC in October;
- These structures provide an alternative to
over-collateralisation in fighting short-term liquidity
- Denmark and Poland are looking to change their
covered bond laws to permit the structures;
- For many investors, however, such structures play
a small role in their overall analysis of a
- Conditional pass-through is tipped to be more
popular among lower-rated issuers.
Conditional pass-through and soft bullet structures will
come to the fore in next year’s European covered
bond market, as issuers look at new ways to deal with
short-term liquidity gaps.
But pass-through will be most popular among lower-rated
issuers, and investors will give greater weight to the credit
risk attaching to the senior unsecured tranche and issuer when
assessing such deals.
While covered bond soft bullets have recently...