approach to bonds issued under recent changes in French law.

In hopes of fostering a more efficient secondary market, France last June amended a law dating from 1852 to provide for a new type of financial institution. Under the new law financial institutions or groups of institutions could form a Societe de Credit Foncier, whose sole purpose would be the refinancing of eligible assets through the issuance of Obligations Fonciers.

The rating agency said it has assigned an Aa rating, pending review of documents, to a $1.6 billion issue of mortgage-backed bonds from one such society, Compagnie de Financement Foncier, and Aaa ratings to two issues totaling $2.6 billion from Dexia Municipal Agency.

"The new French mortgage bond law provides a solid framework on which to structure the assets and liabilities of the SCF so that, with the additions of some contractual provisions, its OFs can achieve an Aaa rating," said Alexandra Sleator, a senior analyst and co-author of the Moody's report. She said more than $200 billion of credit foncier debt is outstanding.

Moody's said the law forbids the extension of bankruptcy proceedings initiated by the parent or parents of a Societe de Credit Foncier to the SCF itself. But the rating agency said the legal provisions "do not completely isolate the creditworthiness of the SCF from external factors."

In assigning ratings, Moody's will consider the strategic importance of the entity to its parent or parents as well as the support extended to the society by its shareholders. It will also factor in the nature and quality of the SCF's assets and its asset and liability management practices.

Separately, Moody's said it has rated more than $300 million of notes issued by a securitization fund created in Spain. The notes are backed by mortgages originated by Bankinter SA.

Moody's said it based its ratings of the notes on a loan-by-loan analysis of the underlying mortgages, the senior-subordinate structure of the issue, and the strength of the cash flows.

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