EUR6,450 million of debt securities rated
Madrid, January 14, 2011 -- Moody's Investors Service has assigned provisional (P) ratings to two
series of notes to be issued by FTA SANTANDER EMPRESAS 8 (the Fondo):
- EUR5,014.9 million series A note, assigned
(P) Aaa (sf)
- EUR1,435.1 million series B note, assigned
(P) Caa1 (sf)
RATINGS RATIONALE
FTA SANTANDER EMPRESAS 8 is a securitisation of standard loans and credit
lines mainly granted by Banco Santander (Aa2/P-1; on review
for possible downgrade) to corporate and small and medium-sized
enterprise (SME).
At closing, the Fondo -- a newly formed limited-liability
entity incorporated under the laws of Spain -- will issue
two series of rated notes. Santander will act as servicer of the
loans and credit lines for the Fondo, while Santander de Titulización
S.G.F.T., S.A. will be
the management company (Gestora) of the Fondo.
As of December 2010, the provisional asset pool of underlying assets
was composed of a portfolio of 31,129 contracts granted to companies
in Spain. In terms of outstanding amounts, 76.8%
corresponds to standard loans and 23.2% to credit lines.
The assets were originated mainly between 2006 and 2010. The weighted-average
seasoning is 1.5 years for the loans sub-pool and 2.3
years for the credit-lines sub-pool, while the weighted-average
remaining terms for these pools are 4.8 years and 2.5 years,
respectively. Around 13.4% of the portfolio is secured
by first-lien mortgage guarantees. Geographically,
the pool is concentrated mostly in Madrid (25.7%),
Catalonia (17.5%) and Andalusia (12.0%).
At closing, there will be no loans more than 30 days in arrears.
In Moody's view, the strong credit positive features of this deal
include, among others: (i) a granular pool (with an effective
number of obligors of over 500); (ii) a swap agreement guaranteeing
an excess spread of 1.0%; and (iii) a geographically
well-diversified pool. However, the transaction has
several challenging features: (i) this is the first securitisation
of credit lines in the Spanish market; (ii) there is a high exposure
to the construction and building industry sector (around 40%);
(iii) a low percentage of assets are secured by a first-lien mortgage
guarantee (13.4%); and (iv) a complex mechanism allows
the Fondo to compensate (daily) the increase on the disposed amount of
certain credit lines with the decrease of the disposed amount from other
lines, and/or the amortisation of the standard loans. These
characteristics were reflected in Moody's analysis and provisional ratings,
where several simulations tested the available credit enhancement and
20% reserve fund 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 assets; (ii) historical performance information and
other statistical information; (iii) the credit enhancement provided
by the pool and swap spreads; and (iv) 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 21.2%, with a coefficient
of variation of 35% and a stochastic mean recovery rate of 37.5%.
As mentioned in the methodology, Moody's used ABSROM cash-flow
model to determine the potential loss incurred by the notes under each
loss scenario. In parallel, Moody's also considered non-modelled
risks (such as counterparty risk).
The ratings address the expected loss posed to investors by the legal
final maturity of the notes (April 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 the key parameters for the rated
notes. For instance, if the assumed default probability of
21.2% used in determining the initial rating was changed
to 27.2% and the recovery rate of 37.5% was
changed to 27.5%, the model-indicated rating
for the series A notes would change to A3 from Aaa, while the series
B model indicated rating would remain Caa1.
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 received and took into account a third-party due diligence
report on the underlying assets or financial instruments in this transaction
and the due diligence report had a neutral impact on the ratings.
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.
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
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 SANTANDER EMPRESAS 8's SME CDO notes
