EUR 450 million of rated debt securities affected
Madrid, December 17, 2010 -- Moody's Investors Service has today assigned provisional ratings to the
notes to be issued by MBS Bancaja 8 FTA:
(P)Aaa (sf) to the EUR 274,500,000 Class A notes due 2064
(P)Caa2 (sf) to the EUR 175,500,000 Class B notes due 2064
RATINGS RATIONALE
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Aaa
Credit Enhancement and the portfolio expected loss, the transaction
structure and any legal considerations.
The expected portfolio loss of 14.5% of original balance
of the portfolio at closing and the MILAN Aaa required Credit Enhancement
of 36.5% served as input parameters for Moody's cash flow
model, which is based on a probabilistic lognormal distribution
as described in the report "The Lognormal Method Applied to ABS Analysis",
published in September 2000.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is higher than MILAN Aaa Credit Enhancement in other Spanish RMBS transactions,
are (i) 18% of the pool correspond to refinanced loans from previously
underperforming loans by the same originator (originator took pre-emptive
action by refinancing ), (ii) the weighted average loan-to-value
(LTV) of 84.4%, (iii) 10% of the pool is in
arrears up to 30 days as of cut-off date, (iv) non residential
properties represent 4.4% of the portfolio and (v) the high
concentration in Valencia region (40.3%).
The key drivers for the portfolio expected loss are (i) the performance
of high LTV loans as well as refinancing loans in the sellers' book,
(ii) 10% of the pool is in arrears up to 30 days as of cut-off
date, and (iii) the higher volatility on non residential property
prices. The assumed expected loss corresponds to an assumption
of approximately 29% cumulative default rate in the portfolio (assuming
recovery is realised with a lag after the default). Given the historical
performance of the high LTV loans in the seller's book, Moody's
believes the assumed expected loss is appropriate for this transaction.
The ratings address the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and principal with respect of the
Class A notes by the legal final maturity and for ultimate payment of
interest and principal with respect to the Class B notes, by the
final legal final maturity. Moody's ratings only address the credit
risk associated with the transaction. Other non-credit risks
have not been addressed, but may have a significant effect on yield
to investors.
The notes are backed by a pool of prime Spanish mortgages granted to individuals
(by Bancaja (A3, Prime-2). The properties are mainly
residential (95.6%), with the remaining part being
commercial properties. At closing the mortgage pool balance will
consist of approximately EUR 450 million mortgage loans. The Reserve
Fund will be funded at 5.0% of the total notes outstanding
and may start to amortise three years after closing to 10.0%
of the outstanding balance of the notes, subject to performance
conditions. The total credit enhancement for the Class A notes
is 44.0%.
The V Score for this transaction is Medium/High, which is higher
than the V score assigned for the Spanish RMBS sector. Four subcomponents
of the V Score have been assessed worse than the average for the sector
and worse also in comparison with other recently issued High LTV Spanish
RMBS. Sector Historical Downgrade Rate performance variability
score is Medium/High, which is higher than a score of Medium for
the Spanish RMBS sector, reflecting that High LTV deals in Spain
have shown worse performance than the market index. The variability
score for Quality of Historical Data is Medium/High mainly because there
is no historical information in the market on the performance of refinancings
of delinquent loans. Issuer/Sponsor/Originator's historical variability
score is Medium/High since previous RMBS deals from this originator show
worse performance than the market index. The score for Transaction
Complexity is Medium/High because high LTV deals are more exposed to house
price declines, thus increasing the volatility on actual losses
and this pool contains loans with adverse risk elements. 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. High variability in key assumptions could expose a
rating to more likelihood of rating changes. The V-Score
has been assigned accordingly to the report "VScores and Parameter Sensitivities
in the Major EMEA RMBS Sectors" published in April 2009.
Moody's Parameter Sensitivities: At the time the rating was assigned,
the model output indicated that Class A notes would have achieved a Aaa
even if the expected loss was as high as 23.2% assuming
MILAN Aaa CE as high at 47.5% and all other factors were
constant.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal has
not aged and is not intended to measure how the rating of the security
might migrate over time, but rather how the initial rating of the
security might have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are calculated
by stressing key variable inputs in Moody's primary rating model.
The principal methodologies used in this rating were Moody's Approach
to Rating Spanish RMBS published in July 2008, Cash Flow Analysis
in EMEA RMBS: Testing Features with the MARCO Model (Moody's Analyser
of Residential Cash Flows) published in January 2006, A Framework
for Stressing House Prices in RMBS Transactions in EMEA published in July
2008, V Scores and Parameter Sensitivities in the Major EMEA RMBS
Subsectors published in April 2009, and Moody's Enhanced Approach
to Originator Assessments in EMEA RMBS Transactions published in October
2009.
Moody's Investors Service 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 rating.
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, parties not 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
Antonio Tena
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Annabel Schaafsma
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
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 Spanish RMBS notes to be issued by MBS Bancaja 8 FTA
