Madrid, February 25, 2019 -- Moody's Investors Service ("Moody's") assigns provisional
rating to tap issuance of Series 28 to be issued by Fondo de Titulizacion
del deficit del sistema electrico, FTA ("FADE"):
....EUR270M Series 28 Notes, Assigned
(P)Baa1 (sf)
This issuance will constitute a tap issuance of Series 28 which was originally
issued in October 2016. The total outstanding amount of Series
28 notes is expected to increase to EUR458 million.
Moody's currently rates the outstanding Series 3, Series 10,
Series 18, Series 21, Series 27, Series 28, Series
29 and Series 31 at Baa1 (sf). All outstanding issuances by FADE,
whether or not rated by Moody's, including the Series 28 are herein
referred to as "the notes". Moody's outstanding ratings of the
notes are not affected by the tap issuance of Series 28 Notes.
Moody's issues provisional ratings in advance of the final sale of financial
instruments, but this rating only represents Moody's preliminary
credit opinions. Upon a conclusive review of a transaction and
associated documentation, Moody's will endeavour to assign definitive
ratings. A definitive rating (if any) may differ from a provisional
rating.
RATINGS RATIONALE
The rating of Series 28 Notes takes into account the specific nature of
this transaction and its unique structure, which differs substantially
from other electricity tariff securitisations as it is recognised by Spanish
royal decree. Moody's has assigned the provisional rating primarily
based on: (i) an evaluation of the guarantee from the Government
of Spain, which guarantees the interest and principal on all FADE
issues; (ii) the current rating of the Government of Spain (rated
Baa1/(P)P-2); and (iii) an evaluation of the structural features
of the transaction.
Moody's rating of the notes is 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. Furthermore, if the
Government of Spain fails to make the required payments under its guarantee,
this could trigger an event of default if the management company considered
this course of action to be in the best interest of the note holders.
Moody's rating of the notes does not consider the additional support that
could be brought by the security over the assets due to (a) the potentially
large cash-flow mismatches between the assets and the rated liabilities,
and (b) the level of predictability of timing of payments under the assets.
This transaction is a securitisation of credit receivables attributed
to certain Spanish utility companies and recognised by Spanish royal decree.
The securitisation allows the utility companies to obtain compensation
for 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 system and electricity consumers have an amount added
to their electricity bills in order to cover this deficit. The
Spanish markets regulator (CNMV) sets, administers and receives
these amounts and passes them on to the specified utilities companies.
With the tap issuance of Series 28 Notes, the issuer will obtain
funds to be used towards refinancing the existing Series 18 Notes which
are due for redemption on 17 March 2019.
Moody's has not rated all outstanding series of notes issued by FADE,
although Moody's has considered those non-rated series in its analysis
of the rating of the tap issuance of Series 28 Notes.
The issuer can issue additional series to refinance previous series becoming
due until 2031. At the present time, all receivables identified
as available for sale to the securitisation have been assigned to the
issuer. All series rank pari-passu with each other.
The Government of Spain (rated Baa1/(P)P-2) provides a guarantee
of interest and principal due under all series of notes issued by the
issuer. The guarantee is enforced by FADE's management company,
and its main features are:
• The guarantee is irrevocable and unconditional.
• Up to a maximum programme size of EUR26 billion.
• The obligations assumed are enforceable on the date when the guaranteed
obligation becomes due (principal or ordinary interest).
• Covers penalty interest on all notes in case payment is not made
on time.
The management company is required to request payment under the guarantee
within five days from the due date of each series of notes. A credit
line granted by Instituto de Credito Oficial (ICO; Baa1/(P)P-2)
for a maximum amount of EUR2.0 billion is available to cover the
issuer's regular senior expenses as well as interest and principal on
all Series. The credit line is immediately available and can be
drawn on any payment date whereas the government guarantee may take a
few days to be paid.
The principal methodology used in this rating was "Rating Transactions
Based on the Credit Substitution Approach: Letter of Credit-backed,
Insured and Guaranteed Debts" published in May 2017. Please see
the Rating Methodologies page on www.moodys.com for a copy
of this methodology.
Factors that would lead to an upgrade or downgrade of the rating:
The rating of the notes could be upgraded or downgraded reflecting changes
in the credit quality of the Government of Spain which acts as guarantor
of the transaction.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Angel Jimenez
Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Volker Gulde
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
