Madrid, January 29, 2014 -- Moody's Investors Service has today confirmed the ratings of two junior
notes and one senior note in three Spanish asset-backed securities
(ABS) transactions backed by loans to small and medium-sized enterprises
(SME ABS) transactions: BBVA Empresas 3, FTA; BBVA Empresas
4, FTA and BBVA Empresas 5, FTA. Moody's Investors
Service has also confirmed the ratings of the junior notes in one Spanish
ABS transaction backed by consumer loans: BBVA Consumo 4,
FTA. A detailed analysis of swap counterparty exposure has prompted
today's confirmations.
The other ratings in these deals, which were not on review for downgrade,
have been affirmed.
The affected notes rating already incorporated a strong level of credit
linkage to BBVA as sole provider of the credit enhancement. Despite
this, the additional exposure to BBVA acting as swap counterparty
had no impact on the ratings given the massive credit enhancement that
the reserve funds provide to the junior notes in the four deals (ranging
from 46% to 140% of the notes' balances).
Today's rating action concludes the review of the ratings in these four
Spanish ABS transactions, which Moody's placed on review on 14 November
2013. The review reflected the swap counterparty exposure following
Moody's introduction of its updated approach to assessing swap counterparties
in structured finance cash flow transactions ("Approach to Assessing Swap
Counterparties in Structured Finance Cash Flow Transactions" published
on the 12 November 2013: https://www.moodys.com/research/Approach-to-Assessing-Swap-Counterparties-in-Structured-Finance-Cash-Flow--PBS_SF344857).
Refer to the end of the ratings rationale section of this press release
for a detailed list of affected ratings.
RATINGS RATIONALE
Today's rating action reflects the availability of sufficient credit enhancement
to address the notes' exposure to the issuer account bank and swap
counterparty Banco Bilbao Vizcaya Argentaria, S.A.
(BBVA, deposits Baa3/P-3, negative outlook, standalone
bank financial strength rating D+/baseline credit assessment baa3).
Moody's assessment follows the introduction of its updated approach
to assessing swap counterparties in structured finance cash flow transactions.
As part of its review, Moody's has incorporated the risk of additional
losses on the notes in the event of them becoming unhedged following a
swap counterparty default. Assets backing the notes in the three
SME ABS deals are mainly referenced to Euro Interbank Offered Rate (EURIBOR),
with small buckets of fixed-interest rate loans in each portfolio
representing less than 10% of the respective pool. Of the
assets backing the notes in BBVA Consumo 4, 100% are fixed-rate
loans (8.55% of weighted-average interest).
Notes are referenced to three-month EURIBOR in the four deals.
The four transactions include a swap agreement with BBVA to hedge this
risk. The swaps in the three SME ABS deals are mainly basis-risk
swaps, while the swap in BBVA Consumo 4 deal is a fixed-floating
rate swap. All the swaps provide excess spread to the transactions,
50 basis points (bps) for the SME ABS deals and 175 bps in BBVA Consumo
4. Net swap payments in recent periods were in favour of the swap
counterparty in the four transactions, given the current interest-rate
environment. No collateral needs to be posted according to the
most recent collateral posting computations made by the valuation agent.
The principal methodology used in rating BBVA Consumo 4, FTA was
Moody's Approach to Rating Consumer Loan ABS Transactions published in
May 2013. The principal methodology used in rating BBVA Empresas
3, FTA, BBVA Empresas 4, FTA, and BBVA Empresas
5, FTA was Moody's Approach to Rating EMEA SME Balance Sheet Securitisations
published in May 2013. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors or circumstances that could lead to a downgrade of the ratings
affected by today's action would be (1) the worse-than-expected
performance of the underlying collateral; (2) deterioration in the
credit quality of the counterparties; and (3) an increase in Spain's
sovereign risk.
Factors or circumstances that could lead to an upgrade of the ratings
affected by today's action would be (1) the better-than-expected
performance of the underlying assets; and (2) a decline in both counterparty
and Spain's sovereign risk.
THE LIST OF AFFECTED RATINGS
Issuer: BBVA Empresas 3, FTA
....EUR2210M Class A Notes, Affirmed
A3 (sf); previously on Jun 20, 2013 Confirmed at A3 (sf)
....EUR260M Class B Notes, Affirmed
A3 (sf); previously on Jun 20, 2013 Confirmed at A3 (sf)
....EUR130M Class C Notes, Confirmed
at Baa1 (sf); previously on Nov 14, 2013 Baa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: BBVA Empresas 4, FTA
....EUR1700M Class A Notes, Confirmed
at A3 (sf); previously on Nov 14, 2013 A3 (sf) Placed Under
Review for Possible Downgrade
Issuer: BBVA Empresas 5, FTA
....EUR975M Class A Notes, Affirmed
A3 (sf); previously on Jun 20, 2013 Confirmed at A3 (sf)
....EUR275M Class B Notes, Confirmed
at Baa1 (sf); previously on Nov 14, 2013 Baa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: BBVA Consumo 4, FTA
....EUR937.7M Class A Notes,
Affirmed A3 (sf); previously on Mar 27, 2013 Confirmed at A3
(sf)
....EUR162.3M Class B Notes,
Confirmed at Baa2 (sf); previously on Nov 14, 2013 Baa2 (sf)
Placed Under Review for Possible Downgrade
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 receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
As the section on loss and cash flow analysis describes, Moody's
quantitative analysis entails an evaluation of scenarios that stress factors
contributing to sensitivity of ratings and take into account the likelihood
of severe collateral losses or impaired cash flows. Moody's
weights the impact on the rated instruments based on its assumptions of
the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 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 rating action, and
whose ratings may change as a result of this 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.
Antonio Tena
Asst Vice President - 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
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's confirms ratings in 4 BBVA Spanish ABS transactions