Frankfurt am Main, April 15, 2013 -- Moody's Investors Service has today upgraded to Baa3 (sf) from Ba3 (sf)
the Class C and Class B notes, respectively, in BBVA Autos
2, FTA and BBVA Finanzia Autos 1, FTA. At the same
time, Moody's confirmed the rating of the Class C notes in BBVA
Autos 1, FTA, the Class A and B notes in BBVA Autos 2 and
the Class A notes in BBVA Finanzia Autos 1. Sufficient credit enhancement,
which protects against sovereign and counterparty risk, primarily
drove the rating action.
Today's rating action concludes the review for downgrade initiated by
Moody's on 02 July 2012. All three affected transactions
are Spanish asset-backed securities (ABS) transactions backed by
auto loans granted to individuals and originated by Banco Bilbao Vizcaya
Argentaria, S.A. (Baa3 /P-3, not on watch)
or BBVA Finanzia (non-rated).
See towards the end of the ratings rationale section of this press release
for a detailed list of affected ratings.
RATINGS RATIONALE
Today's rating action primarily reflects the availability of sufficient
credit enhancement to address sovereign risk and increased counterparty
risk. The introduction of new adjustments to Moody's modelling
assumptions to account for the effect of deterioration in sovereign creditworthiness,
the revision of key collateral assumptions and increased exposure to weakened
counterparties have had no effect on the ratings of all classes of notes
in all three transactions.
The current level of available credit enhancement under the Class C notes
in BBVA Autos 2 (16.1% in the form of reserve funds) and
Class B notes in BBVA Finanzia Autos 1 (22.5% in the form
of a subordination) is sufficient to support an upgrade to Baa3 (sf) from
Ba3 (sf).
-- Additional Factors Better Reflect Increased Sovereign
Risk
Moody's has supplemented its analysis to determine the loss distribution
of securitised portfolios with two additional factors, the maximum
achievable rating in a given country (the local currency country risk
ceiling) and the applicable portfolio credit enhancement for this rating.
With the introduction of these additional factors, Moody's intends
to better reflect increased sovereign risk in its quantitative analysis,
in particular for mezzanine and junior tranches.
See "Structured Finance Transactions: Assessing the Impact of Sovereign
Risk" for a more detailed explanation of the additional parameters.
This report is available on www.moodys.com and can be accessed
via the following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988.
The Spanish country ceiling is A3, which is the maximum rating that
Moody's will assign to a domestic Spanish issuer including structured
finance transactions backed by Spanish receivables. The portfolio
credit enhancement represents the required credit enhancement under the
senior tranche for it to achieve the country ceiling. By lowering
the maximum achievable rating, the revised methodology alters the
loss distribution curve and implies an increased probability of high loss
scenarios.
Under the updated methodology incorporating sovereign risk on ABS transactions,
loss distribution volatility increases to capture increased sovereign-related
risks. Given the expected loss of a portfolio and the shape of
the loss distribution, the combination of the highest achievable
rating in a country for structured finance and the applicable credit enhancement
for this rating uniquely determines the volatility of the portfolio distribution,
which the coefficient of variation (CoV) typically measures for ABS transactions.
A higher applicable credit enhancement for a given rating ceiling or a
lower rating ceiling with the same applicable credit enhancement both
translate into a higher CoV.
-- Moody's Has Revised Its Key Collateral Assumptions
Moody's maintained its default probability (DP) and recovery rate assumptions
for the three transactions, which it updated on 21 December 2012
(see "Moody's updates key collateral assumptions in Italian and Spanish
ABS transactions backed by portfolio of consumer and auto loans" [http://www.moodys.com/research/Moodys-updates-key-collateral-assumptions-in-Italian-and-Spanish-ABS--PR_262879]).
According to the updated methodology, Moody's increased the CoV,
which is a measure of volatility.
For BBVA Autos 1, Moody's increased the CoV to 80.0%
from 25.0%, which, together with a mean DP of
4.3% and a recovery rate of 30.0%, corresponds
to a portfolio credit enhancement of 19.0%.
For BBVA Autos 2, Moody's increased the CoV to 59.0%
from 40.0%, which, together with a mean DP of
7.5% and a recovery rate of 30.0%, corresponds
to a portfolio credit enhancement of 19.0%.
For BBVA Finanzia Autos 1, Moody's increased the CoV to 45.0%
from 25.0%, which, together with a mean DP of
11% and a recovery rate of 20.0%, corresponds
to a portfolio credit enhancement of 24.0%.
-- Moody's Has Considered Exposure to Counterparty
Risk
The conclusion of Moody's rating review also takes into consideration
the exposure to weakened counterparties acting either as originator,
collection agent, issuer account bank or swap counterparty.
The inability of key transaction parties to perform their roles and the
difficulty in replacing them increase the risk of payment disruption and
performance deterioration in structured finance transactions.
In all transactions, BBVA or BBVA Finanzia acts as servicer and
collections account bank, and transfers collections daily to the
treasury accounts in the name of the funds at BBVA. The reserve
funds also reside at BBVA. Société Générale,
Sucursal en Espana (SGSE, Spanish branch of Société
Générale rated A2/ P-1) guarantees the cash held
in the treasury accounts up to EUR23 million for BBVA Autos 1, EUR24
million for BBVA Autos 2 and EUR8 million for BBVA Finanzia Autos 1,
respectively. In addition, any cash held at the treasury
accounts in excess of the guarantee amount is transferred on an ongoing
basis to SGSE's additional treasury accounts (in the name of the funds).
As a result, the risk exposure of the transaction to BBVA is limited
to a commingling loss of one month of collections.
BBVA acts as swap counterparty in BBVA Autos 1 while Deutsche Bank A.G.
(London branch) (A2/P-1) acts as swap counterparty in BBVA Autos
2 and BBVA Finanzia Autos 1. As part of its analysis, Moody's
assessed the exposure to the swap counterparties, which in all transactions
does not have a negative effect on the rating levels at this time.
-- Other Developments May Negatively Affect the Notes
In consideration of Moody's new adjustments, any further sovereign
downgrade would negatively affect structured finance ratings through the
application of the country ceiling or maximum achievable rating,
as well as potentially increased portfolio credit enhancement requirements
for a given rating.
As the euro area crisis continues, the ratings of structured finance
notes remain exposed to the uncertainties of credit conditions in the
general economy. The deteriorating creditworthiness of euro area
sovereigns as well as the weakening credit profile of the global banking
sector could further negatively affect the ratings of the notes.
Moody's describes additional factors that may affect the ratings in the
Request for Comment, "Approach to Assessing Linkage to Swap Counterparties
in Structured Finance Cashflow Transactions: Request for Comment",
02 July 2012.
In reviewing these transactions, Moody's used ABSROM to model the
cash flows and determine the loss for each tranche. The cash flow
model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
In the context of the rating review, Moody's has remodeled the transactions
and adjusted a number of inputs to reflect the new approach described
above. In addition, during its review the rating agency corrected
the spread inputs for the affected notes in these three transactions.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating European Auto ABS ", published in November 2002.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The revised approach to incorporating country risk changes into structured
finance ratings forms part of the relevant asset class methodologies,
which Moody's updated and republished or supplemented on 11 March 2013
("Incorporating Sovereign Risk to EMEA Auto Loan methodology"),
along with the publication of its Special Comment " Structured Finance
Transactions: Assessing the Impact of Sovereign Risk", which
are available on www.moodys.com and can be accessed via
the following links: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988,
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319469.
Other factors used in these ratings are described in "The Temporary Use
of Cash in Structured Finance Transactions: Eligible Investment
and Bank Guidelines", published in March 2013.
LIST OF AFFECTED RATINGS
Issuer: BBVA Autos 1, FTA
....EUR27M C Notes, Confirmed at A3
(sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed
Under Review for Possible Downgrade
Issuer: BBVA Autos 2, FTA
....EUR949.5M A Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR20.5M B Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR30M C Notes, Upgraded to Baa3
(sf); previously on Jul 2, 2012 Ba3 (sf) Placed Under Review
for Possible Downgrade
Issuer: BBVA Finanzia Autos 1 FTA
....EUR744M A Notes, Confirmed at A3
(sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed
Under Review for Possible Downgrade
....EUR26.8M B Notes, Upgraded
to Baa3 (sf); previously on Jul 2, 2012 Ba3 (sf) Placed Under
Review for Possible Downgrade
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 related to the monitoring of these transactions in the past
six months.
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.
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.
Yuezhen?Wang
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Concludes the Review of Three BBVA Spanish Auto Loan ABS with No Negative Actions
