EUR900 Million of debt securities rated.
Milan, December 22, 2010 -- Moody's Investors Service has assigned the following definitive ratings
to the ABS notes issued by BBVA Consumo 5, FTA (the "Issuer"):
- Aaa (sf) to EUR900M Class A Floating rate Notes, due 2025
RATINGS RATIONALE
The subject transaction is a cash securitisation of consumer loans extended
to borrowers resident in Spain and is a revolving structure. The
portfolio consists of unsecured consumer loans used for several purposes,
such as new or used car acquisition, property improvement and other
undefined or general purposes.
This deal benefits from several credit strengths, such as a short
portfolio weighted average life of 3 years and a high granularity of the
underlying portfolio, as well as certain structural features such
as the appointment of a back up servicer upon loss of Baa3 ratings by
BBVA. Moody's however notes that the transaction features a number
of credit weaknesses, as there is a 7-quarters revolving
period, which increases the potential performance volatility of
the underlying portfolio. In addition, there is some exposure
to commingling risk (although partially mitigated by an increase in the
frequency of funds transfer to the issuer at loss of P-1 by BBVA
and the funding of a commingling reserve if BBVA is downgraded below Baa3)
as well as reliance on BBVA (rated Aa2/P-1) to perform a multitude
of roles in the transaction. These characteristics, amongst
others, were considered in Moody's analysis and ratings.
The rating on the notes takes into account, among other factors,
(i) an evaluation of the underlying portfolio of loans; (ii) historical
performance information; (iii) the swap agreement, under which
the swap counterparty will pay the weighted-average margin on the
notes plus an excess spread of 1.75%, and the servicing
fees; (iv) the credit enhancement provided by the excess spread and
the reserve fund; (v) the liquidity support available in the transaction,
by way of principal to pay interest, and the reserve fund;
(vi) the provisions for the appointment of a back-up servicer;
and (vii) the legal and structural integrity of the transaction.
The V Score for this transaction is Medium, which is in line with
the score assigned for the Spanish Consumer loan sector. Some notable
features pertain to the H/M score for "Quality of Historical Data for
the Issuer/Sponsor/ Originator" as the historical information does not
cover a full severe stress scenario and uncertainty whether past performance
adequately reflects future performance-similar to many consumer
loan transactions in Spain given the current economic conditions.
Conversely, the "Experience of, Arrangements Among and Oversight
of Transaction Parties" has been assigned a L/M score given BBVA Finanzia
has around 4 years of securitisation experience, while BBVA launched
its first ABS transaction in 2004 (whereas the first RMBS transaction
was closed in 1993). For more information on V Scores, please
see the report "V Scores and Parameter Sensitivities in the Global Consumer
Loan ABS Sectors", published in May 2009.
In its quantitative assessment, Moody's assumed a mean default rate
of 12.5% for the initial portfolio and 14% for portfolios
acquired during the revolving period, with a coefficient of variation
of 35% and a recovery rate of 30% as the main input parameters
for Moody's cash-flow model ABSROM. In its base case scenario,
Moody's also assumed a constant prepayment rate of 5% and a sinus-shape
timing of defaults, considering a 90 days default definition.
The principal methodology used in this rating was The Lognormal Method
Applied to ABS Analysis, published in July 2000.
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.
For rating this transaction Moody's used ABSROM (v.2.2.7)
to model the cash flows and determine the loss for each tranche.
In the cash flow model, once all of the asset-side modelling
assumptions are input, the model produces a series of default scenarios
that are weighted considering the probabilities of the lognormal distribution
assumed for the portfolio defaults. In each default scenario,
the corresponding loss for each class of notes is calculated given the
incoming cash flows from the assets and the outgoing payments to third
parties and noteholders. Therefore, the expected loss or
EL for each tranche is the sum product of (i) the probability of occurrence
of each default scenario; and (ii) the loss expected in each default
scenario for each tranche.
Moody's Parameter Sensitivities: Moody's principal portfolio model
inputs are Moody's cumulative default rate assumption and the recovery
rate. Moody's tested various scenarios derived from different combinations
of mean default rate (i.e. adding a stress on the expected
average portfolio quality) and recovery rate. For example,
Moody's tested for the mean default rate: 12.5% as
base case ranging to 14.5% and for the recovery rate:
30% as base case ranging to 20%. The model sensitivity
output indicated that Class A model output would vary from Aaa to Aa1
in these scenarios (all other factors being constant). Moody's
Parameter Sensitivities provide a quantitative / model-indicated
calculation of the number of rating notches that a Moody's-rated
structured finance security may vary if certain input parameters would
change. The analysis assumes that the deal has not aged.
It is not intended to measure how the rating of the security might migrate
over time, but rather, how the initial rating of the security
might have differed if the two parameters within a given sector that have
the greatest rating impact were varied.
Provisional ratings were assigned on 15 December 2010.
The ratings address 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
by legal final maturity. 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.
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.
Milan
Paula Lichtensztein
Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's assigns definitive ratings to the ABS notes issued by BBVA Consumo 5, FTA
