Ratings of two CLOs remain on review for downgrade
London, 26 October 2012 -- Moody's Investors Service has today confirmed the A3 (sf) ratings
of five notes in four CLO transactions backed by Spanish receivables.
Today's rating announcement follows the confirmation of (1) the
Kingdom of Spain's government bond rating at Baa3; and (2)
the ratings of several Spanish banks acting as account bank and swap counterparty
in these transactions. Today's rating confirmations conclude
the review for downgrade initiated by Moody's on 2 July 2012.
At the same time, Moody's maintained on review for downgrade
the ratings of two Spanish CLO transactions. A full list of affected
ratings is provided below:
Issuer: TDA Corporativos I, FTA
....EUR669.7M Series A Notes,
Confirmed at A3 (sf); previously on 02 July, 2012 Downgraded
to A3 (sf) and Placed Under Review for Possible Downgrade
....EUR167.45M Series B Notes,
Confirmed at A3 (sf); previously on 02 July, 2012 Downgraded
to A3 (sf) and Placed Under Review for Possible Downgrade
Issuer: Madrid Activos Corporativos III, FTA
....EUR1,320.75M Series A Notes,
Confirmed at A3 (sf); previously on 02 July, 2012 Downgraded
to A3 (sf) and Placed Under Review for Possible Downgrade
Issuer: Madrid Activos Corporativos IV, FTA
....EUR747.6M Series A Notes,
Confirmed at A3 (sf); previously on 02 July, 2012 Downgraded
to A3 (sf) and Placed Under Review for Possible Downgrade
Issuer: Madrid Activos Corporativos V, FTA
....EUR772.85M Series A Notes,
Confirmed at A3 (sf); previously on 02 July, 2012 Downgraded
to A3 (sf) and Placed Under Review for Possible Downgrade
For more details on the rationale for the sovereign action, see
"Moody's confirms Spain's government bond rating at Baa3/(P)P-3,
assigns negative outlook," dated 16 October 2012. For
more information on the rating actions taken by Moody's Financial Institutions
Group, see "Moody's concludes rating reviews on majority
of Spanish banks after sovereign rating confirmation" published
on 24 October 2012.
For additional information on structured finance ratings, please
refer to the webpage containing Moody's related announcements http://www.moodys.com/eusovereign.
RATINGS RATIONALE
Today's confirmations primarily reflect (i) Moody's confirmation
of the Kingdom of Spain's government bond rating at Baa3,
and (ii) the confirmation of the senior unsecured ratings of several Spanish
banks performing the swap counterparty and account bank functions in the
affected transactions. Following the confirmation of Spain's
sovereign, Spain's country ceiling remains at A3. As
a result, the highest achievable rating for Spanish structured finance
transactions also remains at A3 (sf).
As a result of the above, Moody's concludes that while these
transactions still have credit linkages to such banks, the credit
enhancement levels for the senior tranches, ranging from 45%
to 65% are sufficiently robust to support A3 (sf) ratings.
Moody's has maintained on review for downgrade the current ratings
of two CLO transactions in which some or all of the assets composing the
underlying collateral pool have also been maintained on review for downgrade.
These transactions are (1) IM Prestamos Fondos Cedulas, FTA,
whose underlying pool is made up of the first loss pieces from eight structured
cedulas transactions; and (2) ICO Mediacion II, AyT,
whose underlying pool is made up of loans to domestic Spanish banks.
Moody's expects to conclude its review of IM Prestamos Fondos Cedulas
once all the underlying collateral ratings have been reviewed and updated
. For ICO Mediacion II, the next payment date is 21 November
2012, by which time the pool should have amortised further.
The ratings of ICO Mediacion II will be reviewed after the review of underlying
collateral asset ratings has been concluded and updated collateral pool
details become available.
Moody's notes that as the Euro area crisis continues, these
transactions remain exposed to the uncertainties of credit conditions
in the European economy especially as the transactions' portfolios
are materially exposed to corporate and financial institutions domiciled
in Spain. The deteriorating creditworthiness of euro area sovereigns
as well as the weakening profile of the global banking sector could negatively
impact the rating of the notes. Pursuant to the decision to lower
the Spanish country ceiling, Moody's lowered the Series A
Notes ratings from Aa2 (sf) to A3(sf) on 02 July 2012. For more
information please refer to the Rating Implementation Guidance published
on 13 February 2012 "How Sovereign Credit Quality May Affect Other ratings".
Please also refer to Special Comments "Key Drivers of Spanish Bank
Rating Actions" published on 17 May 2012 and "Rating Euro Area Sovereign
Governments Through Extraordinary Times - Implications of Spain's
bank recapitalisation needs and the rising risk of a Greek Exit" published
on 08 June 2012.
On 21 August 2012, Moody's released a Request for Comment seeking
market feedback on proposed adjustments to its modelling assumptions.
These adjustments are designed to account for the impact of rapid and
significant country credit deterioration on structured finance transactions.
If the adjusted approach is implemented as proposed, the rating
of the notes affected by today rating action may be negatively affected.
See "Approach to Assessing the Impact of a Rapid Country Credit Deterioration
on Structured Finance Transactions", (http://www.moodys.com/research/Approach-to-Assessing-the-Impact-of-a-Rapid-Country-Credit--PBS_SF294880)
for further details regarding the implications of the proposed methodology
changes on Moody's ratings.
Moody's did not run a separate loss and cash flow analysis;
in addition, key modelling assumptions, sensitivities,
cash flow analysis and stress scenarios have not been updated as today's
rating actions have been primarily driven by confirmation of Spain's
sovereign rating at Baa3 and the confirmation of many Spanish bank ratings
which were earlier on review for possible downgrade.
The principal methodology used in these ratings was "Moody's Approach
to Rating Corporate Collateralized Synthetic Obligations" published in
September 2009. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
In addition to the quantitative factors that are explicitly modelled,
qualitative factors are part of the rating committee considerations.
These qualitative factors include the structural protections in each transaction,
the recent deal performance in the current market environment, the
legal environment, specific documentation features, the collateral
manager's track record, and the potential for selection bias in
the portfolio. All information available to rating committees,
including macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature
and severity of credit stress on the transactions, may influence
the final rating decision.
REGULATORY DISCLOSURES
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
ratings disclosure page on our website www.moodys.com for
further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see for each issuer the ratings tab on the issuer/entity page on
www.moodys.com for the last rating action and the rating
history. The date on which some ratings were first released goes
back to a time before Moody's ratings were fully digitized and accurate
data may not be available. Consequently, Moody's provides
a date that it believes is the most reliable and accurate based on the
information that is available to it. Please see the ratings disclosure
page on our website www.moodys.com for further information.
The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst and the office that
has issued the credit rating.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Raja Jawanteswara Iyer
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Neelam S. Desai
Senior Vice President
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's confirms A3 (sf) ratings of five Spanish CLO notes
