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Rating Action:

Moody's assigns definitive ratings to the notes issued by FONCAIXA EMPRESAS 3, Fondo de Titulización de Activos

25 Mar 2011

EUR 1.4 billion of securities rated

Madrid, March 25, 2011 -- Moody's Investors Service has assigned the following definitive ratings to the debt issued by FONCAIXA EMPRESAS 3, Fondo de Titulización de Activos:

....EUR300M Serie A1 Note, Assigned Aaa (sf)

....EUR820M Serie A2 Note, Assigned Aaa (sf)

....EUR280M Serie B Note, Assigned B2 (sf)

RATINGS RATIONALE

FONCAIXA EMPRESAS 3, FTA is a securitization of draw-down under lines of credit and loans granted to micro, small- and medium-sized enterprises (SME) and corporate entities by "la Caixa" (Aa2/P-1 Negative Outlook). "la Caixa" is acting as Servicer of the loans while GestiCaixa S.G.F.T., S.A. is the Management Company ("Gestora").

The pool of underlying assets was, as of January 2011, composed of a portfolio of 13,630 contracts (25% of the total amount being draw-downs from lines of credit) granted to obligors located in Spain. The assets were originated between 1997 and 2011, with a weighted average seasoning of 1.9 years and a weighted average remaining term of 10.5 years. Around 54% of the portfolio is secured by mortgage guarantees over different types of properties. Geographically, the pool is located mostly in Madrid (25.9%) and Catalonia (22.6%). At closing, certain loans may be in arrears for up to 30 days, and these are capped at a maximum of 10% of the total pool notional.

According to Moody's, this deal benefits from several credit strengths: (i) there is a swap hedging interest rate risks and guaranteeing 75bps excess spread; (ii) well diversified pool allover Spain; and (iii) an up-front funded reserve fund of €147,700,000 representing 10.55% of the notes.

Moody's notes that the transaction features a number of credit weaknesses, including: (a) according to Moody's industry classification there is 33% exposure to the Construction and Building sector; (b) high concentration with the top 10 single debtors representing around 15% of the portfolio; (c) 25% of the total portfolio are draw-downs under lines of credit, which are flexible products that creates uncertainty in the LtV.

These characteristics were reflected in Moody's analysis and ratings, where several simulations tested the available 30.55% total credit enhancement (i.e. notes subordination and reserve fund) for Series A notes 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 via excess-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 14.31%, and a stochastic mean recovery rate of 57%.

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.

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.

As mentioned in the methodology papers, Moody's used a combination of 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).

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 assumed default probability of 14.31% used in determining the initial rating was changed to 21.53% and the recovery rate of 57% was changed to 37%, the model-indicated rating for Series A2 and Series B of Aaa(sf) and B2(sf) would have changed to A3(sf) and Caa2(sf). Series A1 Aaa(sf) rating would have remain unchanged.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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Madrid
Javier Hevia Portocarrero
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt am Main
Thorsten Klotz
MD - Structured Finance
Structured Finance Group
Moody's Deutschland GmbH
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 assigns definitive ratings to the notes issued by FONCAIXA EMPRESAS 3, Fondo de Titulización de Activos
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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