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Rating Action:

Moody's Assigns Provisional Ratings to three series of Fondo de Titulizacion del deficit del sistema electrico, FTA Notes (FADE)

Global Credit Research - 14 Oct 2013

EUR 950 million Notes, Assigned (P)Baa3 (sf)

On January 31 2014, the press release was revised as follows:The following was added in the Ratings Rationale section as a final paragraph: “The principal methodology used in this rating was ‘Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts’ published in March 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology." Revised release follows:

London, 14 October 2013 -- Moody's Investors Service has today assigned provisional ratings to notes to be issued by Fondo de Titulizacion del deficit del sistema electrico, FTA (FADE):

....EUR 250 million Series 16 Notes, Assigned (P)Baa3 (sf)

....EUR 400 million Series 4 Notes, Assigned (P)Baa3 (sf)

....EUR 300 million Series 17 Notes, Assigned (P)Baa3 (sf)

All three Notes represent additional issuances on existing series previously rated by Moody's. These issuances will constitute an increase in the total amount of Series 16, Series 4 and Series 17 Notes initially issued in March 2013, May 2011 and April 2013 respectively.

Following the new issuances, the total amount of Series 16 Notes will be EUR 1.825 billion, the total amount of Series 4 Notes will be EUR 2.225 billion and the total amount of Series 17 Notes will be EUR 2.100 billion

RATINGS RATIONALE

The rating of the notes takes into account the specific nature of this transaction and unique structure, which differs substantially from other electricity tariff securitisations and is recognised by a Spanish government royal decree. Moody's assigned the ratings primarily based on: (i) an evaluation of the guarantee from the government of Spain, which guarantees the interest and principal payments on the notes; (ii) the current rating of the Government of Spain (Baa3/(P)P-3); and (iii) an evaluation of the structural features of the transaction.

The rating of the notes is fully linked to the rating of the government of Spain, as the claims of the issuer under the guarantee represent an unconditional, irrevocable, legal, valid and binding obligation of the Spanish government, as confirmed by the transaction's legal counsel. Furthermore, if the government of Spain failed to make the required payments under the guarantee, this could trigger an event of default if the management company considered this course of action in the best interest of the noteholders.

The rating of the notes does not consider the additional support that could be brought by the security over the assets due to (a) the potentially large cash-flow mismatches between the assets and the rated liabilities, and (b) the level of predictability of the assets timing of payment based on the available information.

This transaction is a securitisation of credit receivables attributed to certain Spanish utility companies and recognised by Spanish government royal decree. The securitisation allows the utility companies to obtain compensation for shortfalls in the settlement of their regulated activities in the electricity market ("tariff deficit"). The tariff deficit is the difference between the costs incurred to supply the power and the regulated tariffs charged to the end users. The compensation is considered a fixed cost and a fixed amount is added to the electricity bills of the consumers in order to cover this deficit over the next 15 years. The Spanish markets regulator (La Comisión Nacional de los Mercados y de la Competencia) sets, administers and receives these amounts and passes them on to the specified utilities companies.

The issuer has acquired a portion of the tariff deficit receivables generated in 2012. This share accounts for approximately EUR 1.014 billion as of the closing date. The issuer previously issued Series 1, Series 2, Series 3, Series 4, Series 5, Series 10, Series 13, Series 14 , Series 16, Series 17 and Series 18 for a total amount of EUR 20.600 billion (rated Baa3 (sf)), plus Series 6, Series 7, Series 8, Series 9, Series 11, Series 12 and Series 15 for an amount of EUR 2.175 billion (not rated by Moody's) as part of the programme. The issuer will be able to acquire additional tariff deficit receivables over the five years following the first issuance and issue new series notes, as well as issue notes to refinance existing series over the next 20 years. All series of notes will rank pari passu.

Both interest and principal due under the notes will be guaranteed by the Government of Spain (rated Baa3 /(P)P-3).

The main features of the guarantee granted by the Government of Spain are:

• The guarantee is irrevocable and unconditional

• The maximum limit for the programme amount is EUR 26 billion.

• The obligations assumed shall be enforceable on the date where the guaranteed obligation becomes due (principal or ordinary interest).

• The structure envisions that the guarantee will be enforced by the management company (on behalf of the investors).

The amounts due under the notes accrue penalty interest from due payment date. This penalty interest is covered by the government guarantee from the date the interest/principal payments are due (i.e. from the payment date when a shortfall occurs and needs to be covered by the guarantee), as long as the management company requires the payment to the guarantor within five days from the payment date.

In addition, a credit line granted by Instituto de Credito Oficial (ICO) (rated Baa3/P-3) for a maximum amount of EUR 2 billion will be available to cover the issuer's regular senior expenses as well as interest and principal on all series of notes.

Moody's did not perform any cash flow analysis or simulation of stress scenarios as the rating is based on the rating of the Spanish government through the guarantee.

The principal methodology used in this rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in March 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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 in this transaction.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Greg O'Reilly
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

Alex Cataldo
Associate Managing Director
Structured Finance Group
Telephone:+39-02-9148-1100

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 Assigns Provisional Ratings to three series of Fondo de Titulizacion del deficit del sistema electrico, FTA Notes (FADE)
No Related Data.

 

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