EUR 1,045.7 million of debt securities placed on review for possible downgrade
Frankfurt am Main, September 22, 2011 -- Moody's Investors Service has today placed on review for downgrade certain
classes of notes issued by 3 Spanish asset-backed securities (ABS)
SME transactions following performance concerns. Today's rating
action concludes Moody's periodic review of Spanish SME ABS performance.
The transactions affected by today's rating action are:
- FONCAIXA FTGENCAT 4, FTA
- FONCAIXA FTGENCAT 5, FTA
- BANKINTER 3 FTPYME, FTA
A complete list of the affected tranches can be found at the end of the
press release.
RATINGS RATIONALE
Today's rating action, which follows Moody's periodic performance
review of Spanish SME ABS, reflects the weaker-than-expected
performance of the affected transactions as a result of the prolonged
stresses placed on the economic environment over the past three years.
As part of the performance review, Moody's considered the following
four indicators when evaluating the portfolio performance of Spanish SME
ABS: (i) the amount of cumulative defaults or losses that have already
occurred, compared with the latest default or loss assumptions;
(ii) the evolution of delinquency levels over the past year; (iii)
the evolution of credit enhancement since closing; and (iv) the comparison
between projected defaults or losses and the credit enhancement level.
Moody's notes that the overall portfolio performance is, on average,
in line with the rating agency's expectations. However, Moody's
has identified 3 negative outliers that are performing worse than expected,
according to these performance indicators.
--TRANSACTION PERFORMANCE AS OF THE DATE OF THE REVIEW
FONCAIXA FTGENCAT 4, FTA
Moody's placed all the notes in this transaction on review for downgrade
because of the very low levels of credit enhancement in the face of deteriorating
performance. This is a securitisation of Spanish SME loans that
was originated by La Caixa (now Caixabank Aa2/P-1 on review for
downgrade) under the FTGENCAT programme in July 2006. Performance
has deteriorated since November 2009 when the transaction assumptions
were revised, with 90-360 day delinquency levels reaching
their peak at 1.2% in August 2011. As of August 2011,
the cumulative default rate (90-day delinquencies are used as a
default proxy) stands at 3.4% of total securitised assets,
thus increasing towards the current default assumption of 4.3%
over the life of the transaction. The pool factor of total securitised
assets was 39.7% in August 2011. Moody's will
need to assess to what extent loan modification may have played a role
in the lower than average levels of delinquencies observed to date in
this transaction. Moody's notes for instance that 2.3%
of the loans in the current pool have had their maturity extended compared
with the pool used for the previous review. This is a substantial
amount considering that the reserve fund represents only about 2%
of the rated notes in this transaction.
FONCAIXA FTGENCAT 5, FTA
Moody's placed the notes in this transaction on review for downgrade
as a result of downward pressure exerted by a combination of higher-than-expected
default rates and the current low levels of available credit enhancement.This
is a securitisation of Spanish SME loans originated by La Caixa (now Caixabank
Aa2/P-1 on review for downgrade) under the FTGENCAT programme in
November 2007. As of August 2011, the cumulative default
rate (90-day delinquencies are used as a default proxy) was 5.8%
of total securitised assets compared to a current default assumption of
6.7% over the life of the transaction. The pool factor
of total securitised assets was 61% in August 2011. Moody's
notes that 90-360 day delinquency levels in this transaction (1.7%
of the current pool balance) are on an increasing trend. Moody's
has not placed the rating of the senior class AS notes, which represents
22.2% of the notes, on downgrade review, as
they benefit from sequential amortisation. Moreover, Moody's
considers it very unlikely that the pro-rata trigger will be hit
before the AS notes are fully redeemed.
BANKINTER 3 FTPYME, FTA
Moody's placed the notes in this transaction on review for downgrade
because of a combination of worse-than-expected performance
and low credit enhancement levels compared with its peers. This
is a securitisation of Spanish SME loans originated by Bankinter,
S.A. (A2/P-1) under the FTPYME programme in November
2007. As of August 2011, the cumulative default rate (90-day
delinquencies are used as a default proxy) was 7.45% of
the total securitised pool balance compared to a current default assumption
of 12% over the life of the transaction. The pool factor
of total securitised assets was 52% in August 2011. In Q3
2010, performance in this transaction dropped below that of the
average Spanish SME, while Moody's had expected better than
average performance. Moody's notes that in June 2011,
90-360 day delinquency levels in this transaction (2.95%
of the current pool balance) significantly exceeded the Spanish SME index
(2.35% of the current pool balance). In September
2011, cumulative write-offs reached 1.7% of
original pool balance, and the reserve fund was drawn.
--ECONOMIC SITUATION
In addition to the transaction-specific analysis, Moody's
also looked at macroeconomic factors that influence an SME's ability to
repay their debt, such as GDP growth and the evolution of the real-estate
market. Spanish GDP contracted by 3.7% in 2009 and
0.1% in 2010. Moody's expects only 0.7%
growth in GDP in 2011 and believes that Spain will not have the same level
of GDP that it had in 2008, until at least 2013. Spanish
company bankruptcies rose to 1,494 in Q2 2011 from 1243 in Q2 2010
(i.e., a 20.2% year-over-year
rise). The number of bankruptcies in Spain will remain elevated
during the current sluggish economic recovery.
The Spanish government is under significant pressure to tighten its budgetary
position. Higher taxes on companies will place negative pressure
on SME profitability, which will be credit negative. Higher
taxes on consumers will reduce household disposable income and negatively
affect demand for the output of SMEs, which will also be credit
negative. House prices fell 5.2% year on year in
Q2 2011 and are currently 16.6% below their Q2 2008 peak.
Moody's expects that house prices will continue to fall in 2011
and 2012, which will reduce the recovery value of defaulted mortgages
and therefore lead to higher losses on SME loans. In light of the
economic environment, our outlook for Spanish SME collateral performance
remains negative.
--REVIEW PROCESS
As part of its detailed transaction-by-transaction review,
Moody's will reassess the cumulative default rate for the remaining life
of each transaction, reflecting the collateral performance to date
as well as the future macroeconomic environment. Moody's will also
request, whenever not already available, updated data on pool
characteristics such as borrower industry, value of the collateral
and delinquency status. Where necessary, the rating agency
will also seek to keep abreast of current servicing and collection procedures.
Moody's expects to conclude its detailed transaction reviews over the
next six months.
Moody's ratings address the expected loss posed to investors by the legal
final maturity of the notes. 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 methodologies used in this rating were Moody's Approach to Rating
CDOs of SMEs in Europe published in February 2007, 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. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
AFFECTED TRANCHES
Issuer: Bankinter 3 FTPYME, Fondo de Titulización de
Activos
....EUR288.9M A2 Notes, Aa1 (sf)
Placed Under Review for Possible Downgrade; previously on Jan 20,
2010 Downgraded to Aa1 (sf)
....EUR91.2M A3 (G) Notes, Aa1
(sf) Placed Under Review for Possible Downgrade; previously on Oct
8, 2010 Downgraded to Aa1 (sf)
....EUR23.1M B Notes, Baa3 (sf)
Placed Under Review for Possible Downgrade; previously on Jan 20,
2010 Downgraded to Baa3 (sf)
....EUR6M C Notes, Ba2 (sf) Placed Under
Review for Possible Downgrade; previously on Jan 20, 2010 Downgraded
to Ba2 (sf)
....EUR10.8M D Notes, B3 (sf)
Placed Under Review for Possible Downgrade; previously on Jan 20,
2010 Downgraded to B3 (sf)
Issuer: FONCAIXA FTGENCAT 4 Fondo de Titulización de Activos
....EUR326M A (G) Notes, Aaa (sf) Placed
Under Review for Possible Downgrade; previously on Jan 18,
2010 Confirmed at Aaa (sf)
....EUR9.6M B Notes, A2 (sf)
Placed Under Review for Possible Downgrade; previously on Jan 18,
2010 Confirmed at A2 (sf)
....EUR7.2M C Notes, Ba1 (sf)
Placed Under Review for Possible Downgrade; previously on Jan 18,
2010 Downgraded to Ba1 (sf)
....EUR6M D Notes, B3 (sf) Placed Under
Review for Possible Downgrade; previously on Jan 18, 2010 Downgraded
to B3 (sf)
Issuer: FONCAIXA FTGENCAT 5 Fondo de Titulizacion de Activos
....EUR449.4M A (G) Notes, Aa1
(sf) Placed Under Review for Possible Downgrade; previously on Oct
8, 2010 Downgraded to Aa1 (sf)
....EUR21M B Notes, A3 (sf) Placed Under
Review for Possible Downgrade; previously on Dec 22, 2009 Downgraded
to A3 (sf)
....EUR16.5M C Notes, Ba1 (sf)
Placed Under Review for Possible Downgrade; previously on Dec 22,
2009 Downgraded to Ba1 (sf)
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 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.
Ludovic Thebault
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's concludes Spanish SME performance review, places notes on review in three Spanish ABS SMEs on performance concerns
