EUR 850 million of debt securities rated
Madrid, December 13, 2010 --Moody's Investors Service has assigned provisional ratings to two series
of Notes to be issued by MADRID FTPYME I, FTA ("Fondo"):
....EUR 170M Series A1 Note, Assigned
(P) Aaa (sf)
....EUR 680M Series A2(G) Note, Assigned
(P) Aaa (sf)
....EUR 285M Loan B, NR
RATINGS RATIONALE
MADRID FTPYME I, FTA is a securitization of loans mainly granted
to self-employed and small- and medium-sized enterprise
(SME) by Caja Madrid (A1/P-1). The securitization is done
under the FTPYME program following the Spanish Ministry of Economy's allocation
of a new guarantee budget for such transactions for the current year.
At closing, the Fondo -- a newly formed limited liability entity
incorporated under the laws of Spain -- will issue two series of
rated notes and will also enter into a loan agreement to finance the purchase
of the loans (at par) from the Caja Madrid. Caja Madrid will act
as Servicer of the loans for the Fondo, while Titulización
de Activos S.G.F.T., S.A.
will be the Management Company ("Gestora") of the Fondo.
The provisional pool of underlying assets was, as of October 2010,
composed of a portfolio of 10,552 contracts granted to obligors
located in Spain. The loans were originated mainly between 2006
and 2010, with a weighted average seasoning of 2.2 years
and a weighted average remaining term of 7.2 years. Around
21% 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 Madrid (42%), Catalonia
(12.6%) and Comunidad Valenciana (10.6%).
At closing, there will be no loans more than 30 days in arrears.
According to Moody's, this deal benefits from several credit strengths,
such as a relatively low concentration in the Building and Real Estate
sector for the Spanish market (around 19% in the provisional pool
according to Moody's industry classification), low percentage of
loans with principal grace period (less than 11%) and a quite granular
portfolio which Moody's took into consideration in its portfolio analysis.
However, Moody's notes that the transaction features a number of
credit weaknesses, including regional concentration in the Madrid
and limited mortgage guarantees available (22.3%).
These characteristics were reflected in Moody's analysis and provisional
ratings, where several simulations tested the available credit enhancement
and 14.2% reserve fund to cover potential shortfalls in
interest or principal envisioned in the transaction structure.
Series A2(G) benefits from the guarantee of the Kingdom of Spain for interest
and principal payments. Nevertheless, the expected loss associated
with Series A2(G) notes is consistent with a Aaa (sf) rating regardless
of the Spanish Treasury guarantees A2(G).
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 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.
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 pool and swap spreads, 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 14.63% with a coefficient of
variation of 40% and a stochastic mean recovery rate of 42.50%.
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 (Feb 2043). In Moody's opinion,
the structure allows for timely payment of interest and ultimate payment
of principal on Series A1 and A2(G) 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 14.63%
used in determining the initial rating was changed to 16.63%
and the recovery rate of 42.5% was changed to 32.5%,
the model-indicated rating for the Series A1 Notes would remain
Aaa, while the Series A2(G) model indicated rating would change
from Aaa to Aa1. The sensitivity analysis for Series A2(G) does
not take into consideration the benefit from the Spanish government guarantee.
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.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. In addition, Moody's publishes
a weekly summary of structured finance credit, ratings and methodologies,
available to all registered users of our website, at www.moodys.com/SFQuickCheck.
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 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 granular SME CDO Notes to be issued by MADRID FTPYME I
