MOODY'S ASSIGNS DEFINITIVE RATINGS TO ASSET BACKED SECURITIES ISSUED BY BCL MUNICIPIOS I, A SPANISH SECURITISATION FUND
Moody's has assigned Aaa ratings to the Euro 245 million and Euro 900 million Class A1 and Class A2 Bonds as well as an A2 rating to the Euro 60 million Class B Bonos de Titulizaci¢n de Activos (Asset-Backed Securities) issued by BCL Municipios I, Fondo de Titulizaci¢n de Activos, a Securitisation Fund established according to Spanish Law. The proceeds of this securitisation will be used to fund the acquisition from BCL of a portfolio of loans to Spanish Municipalities. The transaction costs will be financed through a subordinated loan from BCL, that will be repaid with excess spread. The transaction is the first Spanish securitisation involving such kind of assets.
BCL is the leading banker of Spanish local governments. Its current shareholders are Banco Bilbao Vizcaya Argentaria (60 per cent) and Dexia (40 per cent). The portfolio is comprised of 2,043 floating rate loans to 1,115 Spanish Municipalities, with a total outstanding amount of approximately Euro 1.3 billion as of May 3rd, 2000 ("the Portfolio"). The Portfolio is spread over the different Spanish Regions. Catalu¤a, Andaluc¡a and Valencia are the three main Regions represented in the Portfolio, with an aggregate of 55 per cent in terms of outstanding principal. The predominant interest rate is 3M Mibor (85.6 per cent), the rest being other Mibor and Euribor indices. The weighted average nominal interest rate is 4.38 per cent, and the weighted average margin over reference rate is 0.46 per cent. The Portfolio has a weighted average seasoning of approximately 41 months, and a weighted average maturity of 125 months.
After closing, and for a period of 10 years, the Fund may purchase new loans on a quarterly basis subject to certain conditions. No new notes will be issued, the purchase price of the new loans will be paid out of the Issuer Available Funds, subject to the cash allocation priorities. The replenishment may be extended, for additional one year periods, at Moody's discretion and upon request by the Management Company.
The Aaa ratings assigned to the Class A1 and Class A2 Bonds are based on: (i) The credit quality of the underlying loans; (ii) The 5 per cent subordination provided by the Class B Notes; (iii) The protection available from a stand-by letter of credit provided by BCL (Aa2/P-1), in an initial amount of 4.5 per cent of the outstanding amounts under the Bonds as of the closing date; (iv) The interest rate swap provided by BCL, covering also interest on defaulted loans; (v) The capacity of BCL as servicer; (vi) The experience of the Management Company Europea de Titulizaci¢n, S.A., S.G.F.T., and the supporting guarantee of its obligations by all of its shareholders; and (vii) The legal and structural integrity of the transaction. The A2 rating assigned to the Class B Bonds is based on the above and on an assessment of the Bonds' subordinated position in relation to the Class A Bonds.
Moody's applied its Binomial Expansion Method in the analysis of the transaction. Even if all the debtors belong to the same "industry", a diversity score of 50 was assumed, given the large number of municipalities in the pool and their independence. The sources of revenue are the Spanish Government and the Regions, but they also have control over certain local taxes (up to a certain limit). To assess the probability of default of the pool, Moody's analysed all defaults (more than 2 years past due) of Spanish municipalities since 1991 on a dynamic basis, and assumed no recoveries from such loans. Moody's derived that the credit quality of the portfolio as a whole (and not the one of any single municipality) would be low investment grade.
Class A1 will amortise according to a pre-defined schedule, between year 5 and 10. Class A2 will amortise on a pass-through basis. Class B will start amortising, also on a pass-through basis, only after Classes A1 and A2 are fully redeemed.
Moody's notes that these ratings reflect an opinion regarding the payment of interest on due date and principal on or before the final legal maturity date of the Bonds (July 2030) and not on their expected maturity date.
BCL Municipios I, FTA is a Spanish Asset Securitisation Fund that has been created by Europea de Titulizaci¢n, S.G.F.T., S.A., an experienced management company. The company's main shareholder is Banco Bilbao Vizcaya Argentaria, who will also act as Depository, Paying Agent and Lead Manager. Banco Urquijo and Cr‚dit Agricole Indosuez will act as Co-Lead Managers.
BCL will act as servicer of the loans. Moody's believes that BCL's collection and quality assurance procedures, as well as its IT systems, should render it capable of fulfilling its servicing obligations in the transaction.
To reserve a copy of Moody's New Issue Report on this transaction, please contact the client service desk in London on 44 (0)20 7772 5454.
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