EUR5,350 million of debt securities rated
Madrid, March 29, 2011 -- Moody's Investors Service has assigned provisional (P) ratings to two
series of notes to be issued by FTA SANTANDER EMPRESAS 9 (the Fondo):
- EUR4,226.5 million series A notes, assigned
(P) Aaa (sf)
- EUR1,123.5 million series B notes, assigned
(P) Caa1 (sf)
RATINGS RATIONALE
FTA SANTANDER EMPRESAS 9 is a securitisation of standard loans and credit
lines mainly granted by Banco Santander (Aa2/P-1; Negative
Outlook) 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 February 2011, the provisional asset pool of underlying assets
was composed of a portfolio of almost 30,000 contracts granted to
companies in Spain. In terms of outstanding amounts, 68%
corresponds to standard loans and 32% to credit lines. The
assets were originated mainly between 2006 and 2010. The weighted-average
seasoning is 1.0 year for the loans sub-pool and 0.7
years for the credit-lines sub-pool, while the weighted-average
remaining terms for these pools are 4.2 years and 0.5 years,
respectively. Around 6.6% of the portfolio is secured
by first-lien mortgage guarantees. Geographically,
the pool is concentrated mostly in Madrid (30%), Catalonia
(14%) and Andalusia (11%). 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 relatively short weighted average
life of 2.2 years; (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) a low portfolio granularity (effective number of obligors below 300);
(ii) a relatively high exposure to the construction and building industry
sector (33.6% according to Moody's industry classification);
(iii) a low percentage of assets secured by a first-lien mortgage
guarantee (6.6%); and (iv) a complex mechanism that
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 14.1%, with a coefficient
of variation of 45% and a stochastic mean recovery rate of 37%.
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 (March 2048). 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
14.1% used in determining the initial rating was changed
to 18.1% and the recovery rate of 37% was changed
to 27%, the model-indicated rating for the series
A notes would change to A2 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 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.
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.
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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
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Moody's assigns provisional ratings to SANTANDER EMPRESAS 9's SME CDO notes
