The likelihood of default on a German asset backed loan – Pfandbriefe – is still strongly correlated to the credit status of the Pfandbriefe issuer and a safer bet than senior unsecured debt, according to Moody’s, the ratings agency.
“Pfandbriefe have a higher credit quality than the senior unsecured debt of the same issuer,” explains Johannes Wassenberg, senior analyst at Moody’s. “This comparatively higher credit quality is reflected in our practice of rating mortgage Pfandbriefe three and public sector Pfandbriefe four notches higher then senior unsecured debt instruments.
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