Madrid, March 08, 2011 -- Correction to text: Add in 2nd paragraph after "Caixa Catalunya",
"now part of Caixa d'Estalvis de Catalunya, Tarragona i Manresa
(referred in this press release as "CatalunyaCaixa") which is now rated
A3/P-2 on review for possible downgrade). The new entity,
CatalunyaCaixa, has been operative since 1 July 2010."
Revised release follows.
Moody's Investors Service announced today that it has downgraded Classes
A, B and C issued by Hipocat 14 and all notes issued by Hipocat
16. A detailed list of the rating actions is provided at the end
of this press release.
In June 2009 Moody's placed the ratings of all notes issued by Hipocat
14 and Hipocat 16 on review for possible downgrade following the rating
action on Caixa Catalunya, now part of Caixa d'Estalvis de Catalunya,
Tarragona i Manresa (referred in this press release as "CatalunyaCaixa")
which is now rated A3/P-2 on review for possible downgrade.
The new entity CatalunyaCaixa, has been operative since 1 July 2010.
RATINGS RATIONALE
Today's rating action concludes the review and takes into consideration
the exposure to CatalunyaCaixa as well as revised assumptions for the
collateral portfolios in both transactions. The downgrades reflects
the performance deterioration in the current down cycle, the large
exposure to flexible mortgages and Moody's negative sector outlook for
Spanish RMBS.
In summer 2010, Moody's noted that the share of written-off
loans reported in the Hipocat series managed by Gestión de Activos
Titulizados (GaT) had been understated.(For more details,
please refer to press release "Moody's placed on review notes in 3 Hipocat
Spanish RMBS and updates on deals managed by GaT", published on
11 August 2010). For this review, Moody's received final
restated amounts of defaulted loans, as reported in the latest investor
reports of the time.
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pools, from which Moody's determined the MILAN Aaa
Credit Enhancement (MILAN Aaa CE) and the lifetime losses (expected loss),
as well as the transaction structure and any legal considerations as assessed
in Moody's cash flow analysis. The expected loss and the Milan
Aaa CE are the two key parameters used by Moody's to calibrate its loss
distribution curve, used in the cash flow model to rate European
RMBS transactions.
Portfolio Expected Loss: Moody's has reassessed its lifetime loss
expectation for Hipocat 14 and 16, taking into account the collateral
performance to date, as well as the current macroeconomic environment
in Spain. In December 2011, cumulative write-offs
in Hipocat 14 and 16 rose to 0.89% and 0.13%,
respectively, of the original pool balance. At the end of
December 2010, the share of 90+ day arrears stood at 0.36%
of current pool balance in Hipocat 14 and 0.03% in Hipocat
16. The reserve funds are currently at target level. Moody's
expects the portfolio credit performance to be under stress, as
Spanish unemployment remains elevated. The rating agency believes
that the anticipated tightening of Spanish fiscal policies is likely to
weigh on the recovery in the Spanish labour market and constrain future
Spanish households finances. Moody's also has concerns over the
timing and degree of future recoveries in a weaker Spanish housing market.
On the basis of Moody's negative sector outlook for Spanish RMBS,
the rating agency has updated the portfolio expected loss assumption to
2.10% of original pool balance in Hipocat 14 and Hipocat
16, up from 1.1%.
MILAN Aaa CE: Moody's has assessed the loan-by-loan
information for Hipocat 14 and Hipocat 16 to determine the MILAN Aaa CE.
Moody's has increased its MILAN Aaa CE assumptions for Hipocat 14 to 13.70%,
up from 5.20% at closing. The rating agency increased
the MILAN Aaa CE for Hipocat 16 to 14.60%, up from
5.90%. The increase in the MILAN Aaa CE reflects
the high concentration of flexible loans and high geographical concentration
in Catalonia. Both transactions are secured by 100% flexible
mortgages. The product in question, called "Crédito
Total" offers the possibility of withdrawing additional funds when
the loan has amortised below the credit limit (first and subsequent draw-downs
will never exceed 80% of the original appraisal value) subject
to specific conditions. These type of flexible loans are riskier
than traditional mortgage loans because as the mortgage loans amortise,
the debtor has the possibility of withdrawing additional funds,
so the LTV may increase to the lowest of the initial LTV or 80%
.
Operational Risk: The rating of CatalunyaCaixa (A3/P-2) is
on review for possible downgrade. CatalunyaCaixa is the servicer
in both transactions. Moody's notes that operational risk in these
transactions is only partially mitigated as there are no trigger in place
to appoint a back-up servicer. The operational risk is not
a driver in today's rating action. However a severe downgrade of
the servicer into the Baa3/Ba range would impact the ratings of the senior
notes.
The rating addresses the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and principal with respect of the
notes by the legal final maturity. Moody's ratings only address
the credit risk associated with the transaction. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
TRANSACTION FEATURES
Hipocat 14 and Hipocat 16 closed in March 2005 and June 2008, respectively.
The transactions are backed by portfolios of first-ranking mortgage
loans originated by CatalunyaCaixa, and secured by residential properties
located in Spain. Their overall balance at closing is EUR909 million
and EUR1.0 billion, respectively. Moody's has been
informed that the servicing of CatalunyaCaixa's mortgage portfolio will
remain on CatalunyaCaixa's servicing platform.
Hipocat 14 consists exclusively of securitisation of additional drawdowns
of CatalunyaCaixa flexible mortgage loan (after the initial drawdown,
any additional drawdown not necessarily the second in order of origination
date). The product, named Crédito Total offers the
possibility of withdrawing additional funds up to the minimum of the original
loan-to-value (LTV) ratio, or 80% LTV.
Hipocat 16 also securitises flexible mortgages (first drawdown and further
drawdowns). As of January 2011, the weighted average current
LTV in Hipocat 14 is 39% and 49% in Hipocat 16%.
The pool concentration in Catalonia represented 85% and 59%
of the current pool balance in Hipocat 14 and Hipocat 16, respectively.
Currently, 2.91% of the portfolio balance in Hipocat
14 and 0.97% in Hipocat 16 corresponds to loans granted
to non-Spanish nationals.
For details on the deal structure, please refer to the Hipocat 14
and Hipocat 16 new issue reports. Both reports are available on
www.moodys.com.
Some features in the deals have changed since closing:
Hedging agreement: CatalunyaCaixa has amended the swap agreements
to achieve substantial compliance with the requirements described in Moody's
report titled "the Framework for De-linking Hedge Counterparty
Risks from Global Structured Finance Cashflow Transactions."These
amendments included the insertion of provisions to: (i) regulate
the collateral arrangements (by way of a market-standard "CSA");
and (ii) requirements for CatalunyaCaixa to take steps to find a replacement
counterparty or guarantor upon the downgrade of its ratings below A3/P-2.
Treasury Bank Accounts: For both transactions, collections
are paid to CatalunyaCaixa (A3/P-2, on review for possible
downgrade) and then transferred every 24 to 48 hours to the treasury account.
CatalunyaCaixa has been replaced as the treasury account bank by Banco
Español de Crédito S.A (Aa3/P-1, on
review for possible downgrade) in Hipocat 14 and by Banco Sabadell S.A.
(A2/P-1 on review for possible downgrade) in Hipocat 16.
Paying Agents: CatalunyaCaixa (A3/P-2 on review for possible
downgrade) in Hipocat 14 and 16. Caixa Catalunya was downgraded
on 15 June 2009 from A2/P-1 to A3/P-2. CatalunyaCaixa
has been replaced as the paying agent by Banco Español de Crédito
S.A (Aa3/P-1 on review for possible downgrade) in Hipocat
14 and by Banco Sabadell S.A. (A2/P-1 on review for
possible downgrade) in Hipocat 16.
Reserve fund: The reserve funds in both deals are currently at target
level.
The principal methodologies used in this rating were Moody's MILAN Methodology
for Rating Spanish RMBS published in July 2008, and Revising Default/Loss
Assumptions Over the Life of an ABS/RMBS Transaction published in December
2008.
Please also refer to the "Spanish RMBS September 2010 Indices",
which is available on www.moodys.com in the Industry / Sector
Research sub-directory under the Research & Ratings tab.
Moody's Investors Service did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
LIST OF RATINGS ACTIONS
Issuer: HIPOCAT 14 FONDO DE TITULIZACIÓN DE ACTIVOS
....EUR868.5M A Notes, Downgraded
to Aa3 (sf); previously on Jun 29, 2009 Aaa (sf) Placed Under
Review for Possible Downgrade
....EUR9M B Notes, Downgraded to A3
(sf); previously on Jun 29, 2009 Aa3 (sf) Placed Under Review
for Possible Downgrade
....EUR22.5M C Notes, Downgraded
to B1 (sf); previously on Jun 29, 2009 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR9M D Notes, Confirmed at Ca (sf);
previously on Jun 29, 2009 Ca (sf) Placed Under Review for Possible
Downgrade
Issuer: HIPOCAT 16 FONDO DE TITULIZACION DE ACTIVOS
....EUR956.5M A Notes, Downgraded
to Aa2 (sf); previously on Jun 29, 2009 Aaa (sf) Placed Under
Review for Possible Downgrade
....EUR25M B Notes, Downgraded to Baa1
(sf); previously on Jun 29, 2009 Aa3 (sf) Placed Under Review
for Possible Downgrade
....EUR18.5M C Notes, Downgraded
to Ba3 (sf); previously on Jun 29, 2009 Baa3 (sf) Placed Under
Review for Possible Downgrade
REGULATORY DISCLOSURES
The ratings have been disclosed to the rated entity or its designated
agents and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Madrid
Alberto Barbachano
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Espana, S.A.
Barbara de Braganza, 2
Madrid 28004
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Correction to Text, March 4, 2011 Release: Moody's downgrades Spanish RMBS notes issued by Hipocat 14 and Hipocat 16
