EUR 1.6 billion of rated debt securities affected
Madrid, June 15, 2011 -- Moody's Investors Service has today assigned provisional ratings to the
notes issued by BBVA RMBS 10 FTA:
EUR 1,376M A Notes, Assigned (P)Aaa (sf)
EUR 224M B Notes, Assigned (P)B1 (sf)
RATINGS RATIONALE
The transaction represents the securitisation of Spanish high loan-to-value
(HLTV) mortgage loans originated by BBVA. The assets supporting
the notes are prime mortgage loans secured by residential properties located
in Spain. The portfolio will be serviced by BBVA.
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 expected portfolio loss of 4.5% of the current portfolio
balance and the MILAN Aaa Credit Enhancement of 17.0% served
as input parameters for Moody's cash flow model, which was 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 Spanish RMBS transactions,
are (i) 100% of loans in the pool are above 80% LTV,
with a weighted-average current LTV (based on valuation at origination)
of 88.0%, (ii) almost all the borrowers can enjoy
different options as semi-bullet payments or payment holidays and
(iii) 5.1% of the pool has been originated through brokers.
The key drivers for the portfolio expected loss which is higher than the
market average in Spanish RMBS transactions are (i) the performance observed
of HLTV mortgage loans, and (ii) the greater severity suffered by
this type of mortgage loans in case of default. The assumed expected
loss corresponds to an assumption of approximately 9.0%
cumulative default rate in the portfolio.
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
notes by the 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 Spanish HLTV mortgage loans granted
to individuals by BBVA (Aa2, Prime-1). The properties
are mainly first residence (97.7%). The mortgage
pool balance will consist of approximately EUR 1.6 billion at closing.
The reserve fund is initially funded at 12.0% of the portfolio
amount as of closing. This reserve fund plus the subordination
(fully sequential) provided by the Class B notes (14.0%)
provide a total credit enhancement for the Class A notes of 26.0%
at closing.
The deal structure has a strong swap in place, whereby the counterparty
(BBVA) will pay the weighted average coupon of the notes plus 40 basis
points (bps) over a notional amount equal to the daily average of outstanding
amount of the non written-off loans that are less than 90 days
in arrears. In return, the special purpose vehicle (SPV)
will pay all the interest actually received.
The V Score for this transaction is Medium, which is in line with
the V score assigned for the Spanish RMBS sector. Only two sub
components underlying the V Score have been assessed higher than the average
for the Spanish RMBS sector. Sector's Historical Downgrade Rate
is Medium, which is higher than the Low/Medium V score assigned
for the Spanish RMBS sector for this sub component because High LTV (HLTV)
pools have historically higher defaults and arrears than traditional mortgages
pools. The Transaction Complexity are also assessed as Medium,
which are higher than the Low/Medium V score assigned for the Spanish
RMBS sector for this sub component. This is because HLTV loans
are more exposed to house price declines. 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 "V-Scores and Parameter
Sensitivities in the Major EMEA RMBS Sectors" published in April 2009.
In terms of Moody's parameter sensitivities, the model output indicated
that Class A notes would have achieved a Aaa even if the expected loss
remains at 4.5% and with the MILAN Aaa CE as high as 20.4%,
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 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 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.
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.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns provisional ratings to Spanish RMBS notes to be issued by BBVA RMBS 10
