Madrid, April 05, 2011 -- Moody's Investors Service has assigned a provisional long-term
rating to a new series of mortgage covered bonds issued by Caja de Ahorros
del Mediterráneo (CAM or the issuer) under its covered bond programme.
Issuer: Caja de Ahorros del Mediterráneo, mortgage
covered bond programme
EUR 1,000M due 04/14/2014, Assigned (P) Aa2 on review for
possible downgrade.
RATINGS RATIONALE
The covered bonds constitute direct, unconditional and senior obligations
of Caja de Ahorros del Mediterráneo and are secured by the issuer's
entire mortgage loan pool (excluding securitised loans).
The rating takes into account the following factors:
(1) The credit strength of the issuer (Baa2 on review for possible downgrade
/ P-2 on review for possible downgrade / D- ).
(2) The structure created by the transaction documents in combination
with the legal framework for Spanish covered bonds.
(3) The credit quality of the assets securing the payment obligations
of the issuer under the covered bonds. The cover assets are residential
and commercial mortgages located in Spain.
(4) As of September 2010, the over-collateralisation level
consistent with the Aa2 on review for downgrade rating is 46% and
the level of over-collateralisation is 170.4%.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the covered bonds.
The ratings assigned by Moody's address the expected loss posed to investors.
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 Aa2 on review for downgrade rating assigned to the existing covered
bonds is expected to be assigned to all subsequent covered bonds issued
by the issuer under this programme and any future rating actions are expected
to affect all such covered bonds. Should there be any exceptions
to this, Moody's will in each case publish details in a separate
press release.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered Bond
Model (COBOL) which determines expected loss as a function of the issuer's
probability of default, measured by its rating of Baa2, and
the stressed losses on the cover pool assets following issuer default.
As of September 2010, the Cover Pool Losses for this programme are
44.4%. This is an estimate of the losses Moody's
currently models in the event of issuer default. Cover Pool Losses
can be split between Market Risk of 21.8% and Collateral
Risk of 22.6%. Market Risk measures losses as a result
of refinancing risk and risks related to interest rate and currency mismatches
(these losses may also include certain legal risks). Collateral
Risk measures losses resulting directly from the credit quality of the
assets in the cover pool. Collateral Risk is derived from the Collateral
Score which for this programme is 33.7%.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI)
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The number of notches by which the issuer's rating may be downgraded before
the covered bonds are downgraded under the TPI framework is measured by
the TPI Leeway. Based on the current TPI of "Probable" the TPI
Leeway for this programme is zero notches, meaning the issuer rating
would need to be downgraded to Baa3 before the covered bonds are downgraded,
all other things being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances. Some examples might be (a) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (b) a multiple notch downgrade of the issuer; or (c) a
material reduction of the value of the cover pool.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the most recent reporting by the issuer and are subject to
change over time.
The principal methodology used in this rating was Moody's Rating Approach
to Covered Bonds, published in March 2010.
REGULATORY DISCLOSURES
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 maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with amendment resulting from that disclosure.
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
Jose de Leon
Senior Vice President
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Madrid
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
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 new series of Caja de Ahorros del Mediterráneo mortgage covered bonds
