Bank of Queensland is preparing to issue a tranche of covered bonds, backed by a pool of residential mortgages, originated by BOQ.This will be BOQ's inaugural covered bond issuance - a notable enough milestone; however, this will also be the first issuance of conditional pass-through covered bonds in the Asia-Pacific region.As of 27 February 2017, the preliminary cover pool consisted of 3,995 residential mortgages loans with a total outstanding balance of around A$1 billion. The pool has a relatively low weighted-average loan-to-value ratio (of 62.5 per cent) with no loans with LTVs above 80 per cent, and a high WA seasoning of just over five years.Moody's Investors Service has assigned a provisional long-term rating of (P)Aaa to these securities, which are being issued under BOQ's A$3.25 billion residential mortgage loan covered bond program.According to the Moody's pre-sale report, "the covered bonds constitute direct, unconditional and unsecured obligations of BOQ. Furthermore, the covered bonds are secured by a pool of residential mortgage loans originated by BOQ."Moody's said it viewed the program's linkage to the issuer as "similar to that of a securitisation transaction". As mentioned, a key structural feature of the programme is the conversion of a series of covered bonds into a pass-through covered bond, with an extension of the due-for-payment date by up to 31.5 years, subject to certain conditions (which ensures this clause is conditional pass-through).Moody's concluded that its timely payment indicator framework does not apply to this BOQ covered bonds programme. This is because the programme's structural features:(1)    substantially reduce refinancing risk following an event of issuer default to the level typical of a securitisation transaction, and (2)    mitigate the risks around the role of the issuer, including limiting the issuer's ability to materially alter the credit risk of the programme and the consequences of the issuer's default on the covered bonds.Due to the nature of BOQ's distribution network, the cover pool has high exposure to Queensland. Approximately 57 per cent of loans are secured by properties located in that state.BOQ was approached but declined to add further comments.