Approximately €1,141 Million of Debt Securities Affected.
Madrid, March 25, 2011 -- Moody's Investors Service announced today that it has downgraded all ratings
of all the notes issued by MBS Bancaja 4 FTA. A detailed list of
the rating actions is provided at the end of this press release.
The ratings of the notes were placed on review for possible downgrade
in November 2009 due to the worse than expected performance of the collateral.
All the loans were originated by Caja de Ahorros de Valencia, Castellón
y Alicante (Bancaja Baa1/P-2 on review for possible downgrade).
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 operational risk is also
a driver of today's rating action on the senior notes.
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 January 2011, cumulative write-offs
rose to 1.89% of the original pool balance. The share
of 90+ day arrears stood at 1.92% 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 0.51%.
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
for 10.0%, up from 4.05% at closing.
The increase in the MILAN Aaa CE reflects the exposure to broker origination
(16.65%), non Spanish nationals (15.20%)
and the concentration in coastal areas. In addition 9.89%
of the portfolio correspond to commercial properties. Credit enhancement
under the Class A (including subordination and reserve fund) is 7.37%.
Operational Risk:
Bancaja (Baa1/P-2 on review for possible downgrade) is the servicer
of this transaction. The operational risk is one of the drivers
of today's rating action on class A2 notes. Moody's
notes that there is not sufficient liquidity in the transaction to allow
timely payment on the notes in case of a servicing transfer. The
reserve fund is not at target level and there are no other sources of
liquidity in the structure. In addition there is no trigger in
place to appoint a back-up servicer. A multi notch downgrade
of the servicer will impact the senior note ratings if other remedies
are not put in place.
Amortisation of Class A2 and A3 notes:
The revised portfolio loss assumptions are also a driver in the downgrade
of the class A2 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.
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
MBS Bancaja 4 closed in May 2007. The transactions is backed by
portfolios of first-ranking mortgage loans originated by Bancaja
secured on residential properties located in Spain, for an overall
balance at closing of EUR 1.85 billion. The securitized
mortgage portfolio benefit from a relatively low weighted average LTV,
currently about 53%. The pool is fairly exposed to the Mediterranean
coast. 8.89% of the portfolio correspond to commercial
properties.
Reserve fund: The rapidly increasing levels of defaulted loans ultimately
resulted in draws to the reserve fund. The reserve fund is currently
at 70% of its target.
Commingling: All of the payments under the loans in this pool are
collected by the servicer under a direct debit scheme into the collection
accounts held at Bancaja (Baa1/P-2 under review for possible downgrade)
and are transferred to the treasury account held at Banco Cooperativo
Español S.A (A1 /P-1) every two days. The
commingling risk has been taken into account in the review of the transaction.
Swap: According to the swap agreement entered into between the Fondo
and BNP Paribas (Aa2 / P-1), on each payment date:
• The swap counterparty will pay the index reference rate of the
notes.
• The Fondo will pay a weighted average of the 12-month Euribor
over the past months for each of the groups, whereby the weights
are fixed for each month on the closing date.
This payment is aimed at replicating the amount of interest corresponding
to the index reference rates that the Fondo receives for each of the groups
between payment dates. The notional will be the outstanding amount
of the loans included in each of the two groups excluding all loans with
arrears of more than 18 months.
For details on the deal structure, please refer to the MBS Bancaja
4 FTA, new issue reports. The 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: MBS BANCAJA 4 Fondo de Titulización de Activos
....EUR1,182.1M A2 Certificate,
Downgraded to Aa2 (sf); previously on Nov 30, 2009 Aaa (sf)
Placed Under Review for Possible Downgrade
....EUR300M A3 Certificate, Downgraded
to Aa2 (sf); previously on Nov 30, 2009 Aaa (sf) Placed Under
Review for Possible Downgrade
....EUR30.5M B Certificate, Downgraded
to Baa2 (sf); previously on Nov 30, 2009 Aa3 (sf) Placed Under
Review for Possible Downgrade
....EUR18.9M C Certificate, Downgraded
to Ba2 (sf); previously on Nov 30, 2009 A3 (sf) Placed Under
Review for Possible Downgrade
....EUR18.5M D Certificate, Downgraded
to B3 (sf); previously on Nov 30, 2009 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR23.1M E Certificate, Downgraded
to C (sf); previously on Nov 30, 2009 Caa3 (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 all ratings on the notes issued by MBS Bancaja 4 FTA.
