Madrid, April 08, 2011 -- Moody's Investors Service announced today that it has downgraded the rating
of all notes issued by RURAL Hipotecario IX. A detailed list of
the rating actions is provided at the end of this press release.
The ratings of all rated notes were placed on review for possible downgrade
in November 2009 due to the worse than expected performance of the collateral.
RATINGS RATIONALE
Today's rating action concludes the review and takes into consideration
the worse-than-expected performance of the collateral.
It also reflects Moody's negative sector outlook for Spanish RMBS and
the weakening of the macro-economic environment in Spain,
including high unemployment rates.
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 taking into account
the collateral performance to date, as well as the current macroeconomic
environment in Spain. In February 2011, cumulative write-offs
rose to 1.42% of the original pool balance. The share
of 90+ day arrears stood at 4.02% of current pool balance.
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
2.20% of original pool balance, up from 0.59%
MILAN Aaa CE:
Moody's has assessed the loan-by-loan information to determine
the MILAN Aaa CE. Moody's has increased its MILAN Aaa CE assumptions
to 10.0%, up from 4.75% at closing.
The increase in the MILAN Aaa CE reflects the exposure to non Spanish
nationals and the concentration in coastal areas. In addition 14%
of the portfolio correspond to second homes. Moody's believes
that loans backed by vacation homes or not owner occupied are riskier
than loans taken for the acquisition of primary residence. In addition,
18% of the portfolio correspond to self employed. As of
the last payment date the credit enhancement under the Class A notes (including
subordination and reserve fund) was equal to 7.80%.
Operational Risk:
The transaction is serviced by 26 cooperative saving banks, of which
two are rated by Moody's (Caja Rural de Granada Baa1/P-2 and Caja
Rural de Navarra A3/P-2 representing approximately 16% of
the portfolio balance). Moody's notes that operational risk in
these transactions is mitigated as Banco Cooperativo Español (A1/P-1)
is appointed as Back Up Servicer. The reserve fund is not fully
funded and represent at 1.25% of the outstanding amount
of the notes. However Moody's notes that this is a multi-servicer
transaction, which partly mitigates servicer disruption risk.
If a servicer were to default, the fondo could use the principal
received from any of the other servicers to make timely payment of interest
under the notes (single waterfall).
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.
Amortisation of Class A2 and A3 notes:
The rating action on class A2 reflects the probability that the Class
A2 and A3 notes will turn to pro-rata payment in high loss scenarios.
The amount retained as principal due will be allocated pro-rata
between Classes A2 and A3 if the aggregated outstanding amount of Classes
A2 and A3, by reason of principal, is equal to or greater
than the outstanding amount of performing loans (including loans up to
90 days in arrears).
TRANSACTION FEATURES
RURAL Hipotecario IX closed in March 2007. The transaction consist
of the securitization of a pool of first mortgage originated by 26 Spanish
Rural saving banks for an overall balance at closing of EUR 1,500
million. The securitized mortgage portfolio benefit from a relatively
low weighted average LTV, currently about 60%. The
pool is exposed to the Mediterranean coast. 14% of the portfolio
correspond to second homes.
Reserve fund: The rapidly increasing levels of defaulted loans ultimately
resulted in draws to the reserve fund. The reserve fund is currently
at 83% of its target. The reserve fund is currently equal
to 1.25 % of the note balance.
Swap: According to the swap agreement entered into between the Fondo
and Banco Cooperativo, on each payment date:
• The Fondo will pay the amount of interest accrued (excluding margins
over the reference index) on the underlying mortgage loans up to 18 months
past due; and
• Banco Cooperativo Español will pay the weighted average
index reference rate on the notes over a notional calculated as the daily
average outstanding amount of loans up to 18 months in arrears.
Commingling: All of the payments under the loans are collected by
the servicers under a direct debit scheme and transferred to the treasury
accounts held at Banco Cooperativo Español (A1/P-1) on a
daily basis. The commingling risk has been taken into account in
the review of the transaction.
For details on the deal structure, please refer to the Rural Hipotecario
IX new issue reports. Report is available on www.moodys.com.
The principal methodologies used in this rating were Moody's Updated
Methodology for Rating Spanish RMBS published in July 2008, Cash
Flow Analysis in EMEA RMBS: Testing Features with the MARCO Model
(Moody's Analyser of Residential Cash Flows) published in January
2006, Moody's Approach to Automated Valuation Models in Rating
UK RMBS published in August 2008, A Framework for Stressing House
Prices in RMBS Transactions in EMEA published in July 2008 and Global
Structured Finance Operational Risk Guidelines: Moody's Approach
to Analyzing Performance Disruption Risk published in March 2011.
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: RURAL HIPOTECARIO IX FONDO DE TITULIZACIÓN DE ACTIVOS
EUR1,021M A2 Notes, Downgraded to Aa3 (sf); previously
on Nov 30, 2009 Aaa (sf) Placed Under Review for Possible Downgrade
EUR210.0M A3 Notes, Downgraded to Aa3 (sf); previously
on Nov 30, 2009 Aaa (sf) Placed Under Review for Possible Downgrade
EUR29.3M B Notes, Downgraded to Baa3 (sf); previously
on Nov 30, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
EUR28.5M C Notes, Downgraded to B2 (sf); previously
on Nov 30, 2009 Baa2 (sf) Placed Under Review for Possible Downgrade
EUR10.5M D Notes, Downgraded to Caa1 (sf); previously
on Nov 30, 2009 Ba3 (sf) Placed Under Review for Possible Downgrade
EUR15.0M E Notes, Downgraded to C (sf); previously on
Nov 30, 2009 Ca (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 purposes 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
Moody's Investors Service downgrades Spanish RMBS notes issued by RURAL Hipotecario IX FTA
