EUR 2 billion of debt securities rated
NOTE: On November 3, 2011, the press release was revised as follows: in the last paragraph preceding Regulatory Disclosures section, substitute “In
Moody's opinion, the structure allows for ultimate payment of interest and principal on the Notes” for “In Moody's opinion, the structure
allows for timely payment of interest and ultimate payment of principal on the Notes."
Milan, February 18, 2011 -- Moody's Investors Service has today assigned provisional rating to Notes
to be issued by Fondo de Titulización del déficit del sistema
EUR2000M Series 2, Assigned (P)Aa1 (sf) and Placed Under Review
for Possible Downgrade
This is a securitisation of the payment rights granted (through a Royal
Decree issued by the Spanish government) to certain Spanish utility companies
to obtain compensation for the 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 of the electricity system and
a fixed amount is added to the electricity bills of the consumers in order
to cover this deficit in the following 15 years. The Spanish electricity
regulator (Spanish Comision Nacional de Energia) sets, administers
and receives these amounts through the electricity system and passes them
on to these companies.
The issuer has acquired a portion of the Tariff Deficit generated between
2008 and 2010. This share accounts for approximately EUR 2 billion
as of the closing date. The issuer has previously issued EUR2000M
Certificates (rated Aa1 (sf), Under Review for Possible Downgrade)
as part of the programme. The issuer will be able to acquire additional
Tariff Deficits in the following 5 years and issue new series notes,
as well as to issue notes to refinance existing series in the following
20 years. All series of notes will rank pari passu.
Both interest and principal due under the notes will be guaranteed by
the Kingdom of Spain, currently rated Aa1/P-1 and under review
for possible downgrade.
The main features of the guarantee granted by the Kingdom of Spain are:
? The guarantee is irrevocable and unconditional.
? Maximum limit for programme amount is 22 billion Euro. This
limit may be increased to 25 billion Euro, subject to approval of
the guarantee limit in the General State Budget Law of the forthcoming
? 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).
? 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 5 days from the payment date.
In addition, a credit line granted by Instituto de Credito Oficial
(ICO; Aa1, under review for downgrade/P-1) for a maximum
amount of EUR2 billion will be available to cover the issuer's regular
senior expenses as well as interest and principal on all series of notes.
Given the specific nature of this transaction and the unique structure
which presents various differences compared to other electricity tariff
securitisations, Moody's assigned the ratings primarily based
on: (i) an evaluation of guarantee from the government of Spain,
(ii) the current rating of the government of Spain, which is Aa1,
under review for possible downgrade/P-1 and (iii) an evaluation
of the structural features of the transaction. Hence, the
rating of the notes are 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.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
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.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
Moody's issues provisional ratings in advance of the final sale of securities
and the above rating reflects Moody's preliminary credit opinions regarding
the transaction only. Upon a conclusive review of the final documentation
and the final note structure, Moody's will endeavour to assign a
definitive rating to the above notes. A definitive rating may differ
from a provisional rating. 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 ultimate payment of principal on the Notes. Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.
The rating has 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 rating are the following:
parties 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 assigning
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.
Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Moody's Italia S.r.l
Moody's assigns Provisional Rating to Notes to be issued by Fondo de Titulización del déficit del sistema eléctrico, FTA
Corso di Porta Romana 68