Ratings agency Moody’s have today confirmed the rating on two tranches of notes issued by Avondale Securities SA. The life insurance-linked notes issued by Avondale Securities, a special purpose vehicle set up in Luxembourg by the Bank Of Ireland, were issued to transfer, or securitize, a block of life insurance risk to the capital markets to allow Bank of Ireland to monetize the expected value in force of a block of life insurance policies.
The ratings on AvondaleSecurities notes had been placed on watch in December last year and were subsequently downgraded after which moody’s left them on a negative watch. The current action has occurred after the Bank Of Ireland received a debt rating downgrade from Moody’s in April and Irelands sovereign debt was also downgraded. moody’s confirmation of the ratings today signifies that they don’t believe the changes in April have impacted the notes to the extent that they needed downgrading any further.
Moody’s said that the notes still have a strong level of collateralisation (239% at the end of 2010) and that the Bank of Ireland has relatively stable stand-alone credit strength, some positive features of the deal which meant they didn’t feel the need to downgrade it any further. However they have kept the notes on a negative outlook as they feel that some risk and uncertainty exists as the economic environment could impact the lapse rate and any increase in that rate would negatively affect the value in force of the securitized book of life insurance business. The negative outlook also reflects the exposure of the Bank of Ireland to Irish government bonds and the banking sector.
You can read our previous coverage of Avondale Securities here.