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Rating Action:

Moody's assigns rating to Spanish Tariff Deficit ABS notes issued by CiMA Finance Designated Activity Company

17 Sep 2019

EUR 119 million of debt securities rated

Madrid, September 17, 2019 -- Moody's Investors Service ("Moody's") has today assigned a rating to the following notes (the "Notes") issued by CiMA Finance Designated Activity Company (the "Issuer"):

....Series 2019-12 EUR 119,000,000 Tariff Deficit Rights Participation Secured Limited Recourse Notes due 2029, Assigned Aa2 (sf)

The Series 2019-12 EUR 119,000,000 Tariff Deficit Rights Participation Secured Limited Recourse Notes due 2029 issued by CiMA Finance Designated Activity Company (the "CiMA Notes") is backed by Spanish electricity tariff deficit receivables. The receivables consist of payments made by the Spanish Comisión Nacional de los Mercados y la Competencia (the "CNMC") to the electricity utility companies that funded a deficit in the regulated Spanish electricity sector in 2013 (the "2013 Tariff Deficit"). This deficit was caused by the imbalances between costs and revenues of the Spanish electricity system which were mainly driven by the remuneration paid to special regime electricity generators (renewable energies). The securitised receivables amount represents around 5.09% of the total recognized amount of the 2013 Tariff Deficit.

CiMA Finance Designated Activity Company ("CiMA") is a special purpose vehicle incorporated in Ireland as a platform for the issue of several series of debt obligations under a programme. Each series of notes issued by CiMA is secured by certain underlying assets (the "Collateral") allocated to each issue. The documentation for each series establishes that the note holders of each series shall only have recourse to the Collateral for such series, not having, therefore, any kind of recourse to the Collateral of any other series. CiMA has primarily restricted its activities to raising limited recourse debt under the programme, so that, in the case of notes, each issue has its own Collateral, which secures the obligations incurred by CiMA for such series. This makes CiMA a bankruptcy remote vehicle as a result of having limited recourse and ring fenced obligations.

RATINGS RATIONALE

Moody's considers the transaction's underlying asset to be of a high quality, as it benefits from the strength of the specific legislation enacted to set forth the regulatory claims and repayment mechanisms. Other factors such as the creditworthiness and strategic role of key counterparties have been also considered in our analysis. At the same time, the rating reflects prevailing trend regarding the long-term containment and sustainability of electricity tariff deficit-related debt in Spain.

Based on the latest available data from CNMC, the ratio between the total outstanding debt from electricity tariff deficits and the regulated revenues is expected to be around 104% for 2018 (definitive figures not yet available), having peaked at 170% in 2012. We expect this ratio to decrease further in 2019. The Spanish government introduced several reforms over the last years in order to rebalance the system costs and revenues, which has resulted in no new deficit being posted since 2013, following a past decade of cumulative deficits.

For these reasons, in the absence of counterparty risk and specific structural features, Moody's currently positions the ratings for securitisations of Spanish electricity tariff deficit receivables at Aa2, which is above the long-term Baa1 sovereign rating on Spain but below the Aa1 country ceiling for Spain.

Moody's noted that the transaction benefits from a strong legal right behind the claims. This is due to the certainty that the collection rights of the Issuer of the compensation entitlement relating to the 2013 Tariff Deficit has been enacted by a specific Royal Decree 1054/2014 (RD 1054/2014) and further detailed in corresponding Ministerial Orders. In addition, RD 1054/2014 set out an obligation on the Spanish Ministry of Industry, Energy and Tourism to include the repayment of 2013 Tariff Deficit as part of the regulated tariffs paid for electricity supply (the "Tariff") and for access to electricity grids (the "Access Tolls") in order to recover on a linear basis the 2013 Tariff Deficit by 31 December 2028.

There remain, however, certain risks. The Notes do not benefit from any liquidity or hedging mechanism to protect from any delays in payments from the CNMC, which is nevertheless mitigated by the pass-through nature of the payments. In any case, the transaction strongly relies on the performance of CNMC on channeling and distributing the monies to the Issuer.

In addition, Moody's notes that there is no explicit guarantee from the Spanish Government to repay the 2013 Tariff Deficit should there be insufficient amounts collected from the Spanish electricity sector during the life of the transaction to repay the 2013 Tariff Deficit in full.

Moody's analysis focused, amongst other factors, on:

• The high quality receivables backing the Notes. The receivables that secure payments on the Notes are essentially claims on the Spanish electricity system. This includes the fact that there is significant historical coverage of fixed costs compared to annual revenues of the electricity sector. As such, payments under the transactions primarily rely on the ability of the Spanish electricity sector to generate sufficient revenues during the transaction horizon to repay the receivables backing the notes in full.

• Seniority of Tariff Deficit receivables. Article 16 of RD 1054/2014 sets forth that the 2013 Tariff Deficit as well as the receivables resulting from any other tariff deficits shall have seniority for payment over other electricity system costs.

• An evaluation of the legal and structural features of the transaction including the true-up mechanism whereby outstanding amounts of the 2013 tariff deficit are considered when access tolls are calculated every year, the pass through interest and principal amounts payable on the Notes and the obligations of the CNMC as regulator to comply with the settlement procedure laid out under primary and secondary legislations to repay the Beneficiaries.

• Performance of previous transactions: no defaults or losses have been experienced under the preceding transactions backed by similar portfolios of credit rights in Spain.

The principal methodology used in this rating was "Moody's Global Approach to Rating Securities Backed by Utility Cost Recovery Charges" published in June 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The underlying assets' credit quality would weaken if any electricity reforms weaken the terms of the tariff deficit receivables, new deficits maintain or increase the system's debt level or if the Spanish government's creditworthiness weakens.

The assets' credit quality would benefit from a stronger-than-expected macroeconomic environment in Spain, resulting in an improvement in the government's creditworthiness. They would also benefit from a positive trend in electricity tariff deficits reduction.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gaston Wieder
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Carole Gintz
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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