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Related Issuers
Rating Action:

Moody's assigns provisional ratings to BBVA EMPRESAS 5's SME CDO notes

08 Mar 2011

EUR 1,250 million of debt securities rated

Madrid, March 08, 2011 -- Moody's Investors Service has assigned provisional ratings to two series of Notes issued by BBVA EMPRESAS 5, FTA:

....EUR 975M Series A Notes, Assigned (P)Aaa (sf)

....EUR 275M Series B Notes, Assigned (P)A3 (sf)

RATINGS RATIONALE

BBVA EMPRESAS 5 is a securitization of loans granted to corporate and small- and medium-sized enterprise (SME) by BBVA (Aa2 on review for possible downgrade/P-1). The portfolio consists of standard loans, some secured by real estate and some unsecured, used to fund general working capital and long-term business expansion. BBVA is acting as Servicer of the loans while Europea de Titulización S.G.F.T., S.A. is the Management Company ("Gestora").

The provisional pool of underlying assets was, as of February 2011, composed of a portfolio of 7,626 contracts granted to obligors located in Spain. The loans were originated between 2000 and 2010, with a weighted average seasoning of 2.1 years and a weighted average remaining term of 6.6 years. Around 42% of the outstanding of the portfolio is secured by first-lien mortgage guarantees over different types of properties. Geographically, the pool is concentrated mostly in Catalonia (26%), Madrid (17%) and Andalusia (12%).

According to Moody's, this deal benefits from several credit strengths, such as a relatively short weighted average life of 3.8 years, a relatively high (around 25%) percentage of corporate (annual turnover above €50 million) and a simple structure. Moody's notes that the transaction features a number of credit weaknesses, including a high concentration in the Construction and Building sector (30%), 15% bullet loans and a relatively low portfolio granularity (Effective Number of Obligors over below 250). These characteristics were reflected in Moody's analysis and provisional ratings, where several simulations tested the available excess spread and 20% reserve fund to cover potential shortfalls in interest or principal envisioned in the transaction structure.

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 and take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

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 14.9% with a coefficient of variation of 42.6% and a stochastic mean recovery rate of 47.5%.

As mentioned in the methodology, Moody's used in combination its CDOROM model (to assess the coefficient of variation of the 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 ratings address the expected loss posed to investors by the legal final maturity of the notes (September 2052). In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal on Series A and B 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 assumed default probability of 14.9% used in determining the initial rating was changed to 19.4% and the recovery rate of 47.5% was changed to 37.5%, the model-indicated rating for the Series A Notes would change from Aaa to Aa1, while the Series B model indicated rating would change from A3 to Ba1.

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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
Luis Mozos
Asst Vice President - 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 provisional ratings to BBVA EMPRESAS 5's SME CDO notes
No Related Data.
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​
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