EUR 2 billion of debt securities rated
London, 28 February 2011 -- Moody's Investors Service has assigned definitive ratings to four series
of Notes issued by Empresas Banesto 2, Fondo de Titulización
de Activos:
....EUR1834M ANote (currently EUR696.9M
outstanding), Definitive Rating Assigned Aaa (sf)
....EUR106M B Note, Definitive Rating
Assigned Aa3 (sf)
....EUR60M C Note, Definitive Rating
Assigned Ba1 (sf)
RATINGS RATIONALE
Empresas Banesto 2 is a securitization of loans mainly granted to small-and
medium-sized enterprise (SME) by Banesto who is also acting as
the Servicer of the loans while Santander de Titulización S.G.F.T.,
S.A. is the Management Company ("Gestora").
The transaction closed in June 2008 and was initially not rated by Moody's.
The initial notes balance issued at closing (shown above next to the assigned
rating) amounted to EUR 2 billion. The outstanding notes balance
as of the last payment date in January 2011 amounts to EUR 862.9
million.
Moody's rating analysis of the notes is based on the transaction structure
after the last payment date in January 2011. The next payment date
will take place in April 2011.
The pool of underlying assets was, as of November 2010, composed
of a portfolio of 4564 contracts (originated between 1995 and 2007),
granted to obligors located in Spain. The portfolio has a weighted
average seasoning of 4.2 years and a weighted average remaining
term of 7.4 years. Around 52% of the outstanding
amount of the portfolio is secured by first-lien mortgage guarantees
over different types of properties (mainly residential and commercial).
All the figures are calculated on the outstanding amounts of loans with
arrears less than 18 months.
According to Moody's, this deal benefits from several credit strengths,
such as a good portion of the pool represented by corporate names (approximately
13%), almost all the loans (approximately 99.9%
of the pool amount) are fully amortising and a strong swap is in place
paying 3m Euribor plus a 0.60% spread. However,
Moody's notes that the transaction features some credit weaknesses,
among others the low granularity of the portfolio of loans(with an Effective
Number of 246) . Moody's also notes the exposure to commingling
risk mitigated somewhat by the fact that the Servicer transfers collections
every two days to the Treasury account in the name of the SPV.
These characteristics were reflected in Moody's analysis and ratings,
where several simulations tested the available credit enhancement and
reserve fund (as of January 2011) to cover potential shortfalls in interest
or principal envisioned in the transaction structure.
Moody's analysis focused primarily on (i) an evaluation of the underlying
portfolio of loans; (ii) historical performance information and other
statistical information; (iii) the credit enhancement provided by
the swap spread, the cash reserve and the subordination of the notes.
The resulting key assumptions of Moody's analysis for this transaction
are a mean default rate of 16.2% with a coefficient of variation
of 38.3% and a stochastic mean recovery rate of 57.5%.
The principal methodologies used in this rating were Refining the ABS
SME Approach: Moody's Probability of Default assumptions in the
rating analysis of granular Small and Mid-sized Enterprise portfolios
in EMEA published in March 2009, and Moody's Approach to Rating
Granular SME Transactions in Europe, Middle East and Africa published
in June 2007.
As mentioned in the methodology, Moody's used in combination its
CDOROM model (to generate the default distribution) and ABSROM cash-flow
model to determine the potential loss incurred by the notes under each
loss scenario. In parallel, Moody's also considered non-modeled
risks (such as counterparty risk).
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
The ratings address the expected loss posed to investors by the legal
final maturity of the notes (July 2041). In Moody's opinion,
the structure allows for timely payment of interest and ultimate payment
of principal on Series A, B and C at par on or before the rated
final legal maturity date. 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 V Score for this transaction is Medium/High, which is in line
with the score assigned for the Spanish SME sector and representative
of the volatility and uncertainty in the Spanish SME sector. V-Scores
are a relative assessment of the quality of available credit information
and of the degree of dependence on various assumptions used in determining
the rating. For more information, the V-Score has
been assigned accordingly to the report " V Scores and Parameter Sensitivities
in the EMEA Small-to-Medium Enterprise ABS Sector " published
in June 2009.
Moody's also ran sensitivities around key parameters for the rated notes.
For instance if the recovery rate of 57.5% was changed to
47.5%, the model-indicated rating for the Series
A Notes would remain Aaa. Also if the assumed default probability
of 16.2 % used in determining the initial rating was changed
to 20.6% and the recovery rate of 57.5% was
changed to 47.5%, the model-indicated rating
for the Series A Notes would change from Aaa to Aa2, while the Series
B model indicated rating would change from Aa3 to Baa3 and the Series
C model indicated rating would change from Ba1 to B3.
REGULATORY DISCLOSURES
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.
London
Luca Vit
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Stefan Augustin
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 Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns definitive ratings to granular SME CDO Notes issued by Empresas Banesto 2, FTA
