BRL 85 million of senior shares and BRL 10 million of mezzanine shares rated
Sao Paulo, March 22, 2011 -- Moody's America Latina (Moody's) has assigned definitive ratings of Aa3.br
(sf) (Brazilian National Scale) and Ba2 (sf) (Global Scale, Local
Currency) to the Senior Shares, and Ba2.br (sf) (Brazilian
National Scale) and B3 (sf) (Global Scale, Local Currency) to the
Mezzanine Shares issued by Tavex Modal Recebíveis Performados II
Fundo de Investimento em Direitos Creditórios ("Tavex Modal FIDC
II"), a securitized transaction backed by a pool of trade receivables
originated by Tavex Brasil S.A. ("Tavex").
Issuer: Tavex Modal Recebíveis II Fundo de Investimento em
Senior Shares -- rated Aa3.br (sf) (National Scale) &
Ba2 (sf) (Global Scale, Local Currency).
Mezzanine Shares -- rated Ba2.br (sf) (National Scale) &
B3 (sf) (Global Scale, Local Currency).
The ratings are based on the following factors, among others:
- Target and minimum subordination for the Senior Shares of 15%
and 12%, respectively, to mitigate losses, dilution
and potential interest rate mismatches;
- Target subordination of 5% for the Mezzanine Shares to
mitigate losses, dilution and potential interest rate mismatches;
- The strict provisioning methodology to be employed by Banco Modal
S.A., the trustee of the transaction, whereby
receivables 90 days past due will be 100% provisioned;
- Maximum individual concentration limit of 5% per obligor,
where the top ten clients cannot represent more than 25% of the
fund's net assets and the remaining balance is distributed in at
least 100 separate clients;
- The ability of Banco Bradesco S.A. (A1 Long-term
Bank Deposit Rating in the Global Local Currency Scale & Aaa.br
in the Brazilian National Scale) to act as master and back-up servicer
for the transaction; and
- The legal structure of the transaction, including the bankruptcy
remoteness of the issuer.
The originator and seller of the trade receivables is Tavex Brasil S.A.
(formerly Santista Textil) and is a subsidiary of the Spain-based
Tavex Group that resulted from the 2006 merger of Santista Textil (founded
in 1929) and Tavex Algodonera (founded in 1846). Approximately
49.7% of Tavex Group's shares (voting / total) are
owned by Camargo Correa, a large Brazilian industrial group (not
rated by Moody's).
The transfer of receivables from the originators to the issuer is structured
as a true sale and a definitive assignment of the contracts as set forth
in the assignment of transferred credits under the Brazilian civil code.
Tavex Modal FIDC II has a tenor of 24 months with an optional 6 month
extension period. Extension occurs automatically in the event of
senior and/or mezzanine share to remain outstanding at the end of the
amortization period in month 24. The senior and subordinated mezzanine
shares will accrue interest over the first 12 months of the transaction,
and will be amortized in 12 monthly installments from month 13 to month
24. Principal and interest payments during the amortization period
will be done pari-passu as long as no early liquidation event has
occurred and subordination of senior shares is above 15%.
In order to rate the transaction, Moody's has received pool
performance data covering the time period April 2007 through March 2010
from Tavex and audited by KPMG. Key data reviewed by Moody's
included dilutions, delinquencies, losses, receivable
turnover and volume of eligible receivables.
Moody's key ratings-model assumptions for this transaction are
monthly losses, monthly dilutions, average turnover of receivables
and Tavex´s credit estimate.
Moody's observed a historical average of BRL 130 million for monthly
outstanding balance over this period, 2.15% monthly
dilutions, 0.61% monthly losses and an average turnover
of 109 days.
As modeling input assumptions Moody's used a central stressed mean
of 4.30% for monthly dilutions and 1.22% for
monthly losses over outstanding balance.
The main uncertainties of the transaction relate to monthly losses,
monthly dilutions, average turnover of receivables and the financial
standing of Tavex. Actual experienced monthly losses observed by
Moody´s via monthly custodian reports are benign and reflect the
favorable macro-economic conditions of Brazil. A downturn
of the economy coupled with a slowdown of consumer spending would,
in Moody´s view, lead to heightened loss and dilution figures.
Moody's parameter sensitivities provide a quantitative/model-indicated
calculation of how the rating of a Moody's-rated structured finance
security may vary if certain input parameters used in the initial rating
process differed. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the parameter
sensitivity analysis. The results generated by rating models are
one of many inputs to the rating process. Ratings are determined
collectively through the exercise of judgment by rating committees,
which evaluate many quantitative and qualitative factors.
For example, if the monthly loss and monthly dilution input parameters
used in the initial rating process were both increased by 1% p.m
(resulting in a central mean of 5.30% monthly dilutions
and 2.22% central mean of monthly losses) the model implied
rating for the Senior Shares would be Ba3 (sf) (Global Scale, Local
Currency), a one-notch differential from the actual Ba2 (sf)
assigned ratings. Similarly, if the monthly loss and monthly
dilution input parameters used in the initial rating process were both
increased by 2% (resulting in a central mean of 6.30%
monthly dilutions and 3.22% central mean of monthly losses),
the resulting model implied rating on the Senior Share would be B1 (sf),
representing a two-notch rating differential from actual Ba2 (sf)
assigned ratings. The rating on the Mezzanine Shares of B3 (sf)
would remain stable in these scenarios.
Moody´s notes that actual performance statistics of the transaction
are in line with the historical dilution and historical loss rates (and
therefore within the stressed dilution and loss rate). Actual turnover
of the securitized portfolio has been approximately 45 days and well within
the historical turnover of the sellers portfolio.
Further details of Moody's analysis of the Tavex Modal FIDC II can be
found in the Presale Report published in Moody's website, www.moodys.com.
The principal methodology used in rating this transaction is "Moody's
Approach to Rating Trade Receivables Backed Transactions", published
in July 2002 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this transaction can also be found in the Rating Methodologies
subdirectory on Moody's website. In addition, Moody's publishes
a weekly summary of structure finance credit, ratings and methodologies
available to all registered users of our website, at www.moodys.com/SFQuick
Moody's Investors Service received and took into account a third party
due diligence report prepared by KPMG on the underlying assets or financial
instruments in this transaction and the due diligence report had a positive
impact on the rating. The due diligence report involved the review
of approximately 235,000 invoices or BRL 1.8 billion of invoices
originated from April 1, 2007 through March 2010.
Information source(s) used to prepare the credit rating are the following:
parties involved in the ratings and public information.
Moody's Investors Service considers the quality of information available
on the certificates satisfactory for the purposes of assigning a credit
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.
Vice President - Senior Analyst
Structured Finance Group
Moody's America Latina Ltda.
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's assigns definitive ratings to Tavex Modal FIDC II senior and subordinated mezzanine shares, a Brazilian trade receivables securitization
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