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I AGREE
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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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
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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