Structure of capital centres

  • The covered bonds are issued from a so-called capital centre (cover pool).
  • Capital centre liabilities consist of mortgage covered bonds ("særligt dækkede obligationer – SDOs – or "realkreditobligationer" – ROs), equity and other liabilities.
  • SDO Capital Centre J is used to fund government-guaranteed public housing loans. The underlying bonds are also government-guaranteed, and the bonds issued in 2019 were all sold to Danmarks Nationalbank. Danmarks Nationalbank has also undertaken to buy all bonds issued in 2020.
  • The cover pool assets of Nykredit's capital centres mainly consist of loans secured by mortgage on (mainly Danish) real estate. They also include securities and other assets used, for instance, to meet the statutory capital requirement of 8%, the requirement of supplementary collateral etc.
  • Most new bonds are issued from SDO Capital Centres E and H, which represent the bulk of the total outstanding amount of covered bonds. Other new bonds are issued from RO Capital Centres G and I.
  • Danish covered bond investors are protected by dual recourse, whereby they have a claim on both the cover assets in the capital centre and on the capital of the issuer.

A RO capital centre. No new loans are issued from this capital centre, and the mortgage loans in the capital centre may be refinanced into loans in other capital centres or will run off.

An SDO capital centre. Most of the mortgage loans in Capital Centre E carry a fixed interest rate. All loans have a term of 10 to 30 years and are match-funded throughout the loan term.

The covered bonds (ROs) in Capital Centre G carry a variable interest rate and are subject to refinancing. Most of the loans have terms that are longer than the maturities of the underlying covered bonds. The bonds must therefore be issued with a maturity extension option (soft bullets). 

The bonds are issued to fund loans for commercial properties, agricultural properties etc. Until 2014 bonds from Capital Centre G were also used to fund residential mortgage loans.

An SDO capital centre. The mortgage loans of Capital Centre H carry a variable interest rate and are subject to refinancing. Most of the loans have terms that are longer than the maturities of the underlying covered bonds. The bonds must therefore be issued with a maturity extension option (soft bullets).

Customers bear the refinancing risk.

 

The covered bonds (ROs) in Capital Centre I carry a fixed interest rate. All loans have a term of 20 to 30 years and are match-funded throughout the loan term. Until 2014 bonds in Capital Centre I were also used to fund residential mortgage loans.

An SDO capital centre from which 1-10-year bullet covered bonds are issued to fund public housing loans.

The loans and bonds are government-guaranteed. The bonds issued in 2019 were all sold to Danmarks Nationalbank. Danmarks Nationalbank has also undertaken to buy all bonds issued in 2020.