Madrid, January 23, 2014 -- Moody's Investors Service has today downgraded the ratings of three mezzanine
notes in three Spanish residential mortgage-backed securities (RMBS)
transactions: Bankinter 4, FTH (Bankinter 4); Bankinter
7, FTH (Bankinter 7) and Bankinter 9, FTA (Bankinter 9).
Swap counterparty exposure has prompted today's action. At the
same time, Moody's confirmed the ratings of three notes in Bankinter
3, FTH (Bankinter 3), Bankinter 4 and Bankinter 9, as
a result of the rating agency's detailed analysis of swap counterparty
exposure. Other ratings in these deals, which were not on
review for possible downgrade, have been affirmed.
Today's rating action concludes the review of the ratings in these four
Spanish RMBS transactions, which Moody's placed on review
on 14 November 2013, in relation to swap counterparty exposure following
the introduction of the rating agency's updated approach to assessing
swap counterparty linkage in structured finance transactions (https://www.moodys.com/research/Moodys-reviews-for-downgrade-EMEA-RMBS-and-ABS-transactions-due--PR_286515).
This rating action also concludes the review of the rating of the C(T)
notes in Bankinter 9, which Moody's placed on review on 4
December 2013 also as a result of swap counterparty exposure (https://www.moodys.com/research/Moodys-reviews-for-downgrade-the-rating-of-CT-notes-in--PR_288050).
See towards 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 impact on the four transactions of
their exposure to Bankinter, S.A. (Bankinter,
Ba1/NP) as swap counterparty, following the introduction of the
rating agency's updated approach to assessing swap counterparty linkage
in structured finance cash flow transactions ("Approach to Assessing Linkage
to Swap Counterparties in Structured Finance Cash Flow Transactions" published
on the 12 November 2013).
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 these four
deals are referenced to the 12-month Euro Interbank Offered Rate
(EURIBOR) and 12-month Madrid Inter-Bank Offered Rate (MIBOR),
while notes are referenced to three-month EURIBOR. The four
transactions include a swap agreement with Bankinter to hedge this risk.
All the swaps are basis risk swaps, which do not provide excess
spread to the transactions. Net swap payments in recent periods
were in favour of the swap counterparty in the four transactions,
given the current interest rate environment. However, net
swap payments could be in favour of the issuer in future. While
high margins on the assets compared to the notes could partially offset
basis risk, the margins on the loans are low (i.e.,
weighted average margins on the loans stood at 66 basis points (bps) in
Bankinter 3, 57 bps in Bankinter 4, 62 bps in Bankinter 7
and 56 bps and 44bps for both sub pools of Bankinter 9 as of the July
2012 pool cuts).
Moody's understands that a swap collateral account has been opened with
Bankinter and that the swap counterparty is currently posting collateral
for Bankinter 3 and Bankinter 4, but not for Bankinter 7 and 9.
No collateral needs to be posted for Bankinter 7 and 9, according
to collateral posting computations made by the valuation agent.
Key modelling assumptions, sensitivities, cash-flow
analysis and stress scenarios for the affected transactions have not been
updated, as the assessment of counterparty exposure has primarily
driven the rating action.
Factors that would lead to an upgrade or downgrade of the rating
Factors or circumstances that could lead to a downgrade of the ratings
affected by today's action would be the worse-than-expected
performance of the underlying collateral, deterioration in the credit
quality of the counterparties and an increase in sovereign risk.
Factors or circumstances that could lead to an upgrade of the ratings
affected by today's action would be the better-than-expected
performance of the underlying assets, and a decline in both counterparty
and sovereign risk.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in November 2013.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
LIST OF AFFECTED SECURITIES
Issuer: BANKINTER 3, FTH
....EUR1273.6M A Notes, Affirmed
A3 (sf); previously on Mar 15, 2013 Confirmed at A3 (sf)
....EUR33.7M B Notes, Affirmed
Baa3 (sf); previously on Mar 15, 2013 Downgraded to Baa3 (sf)
....EUR15.2M C Notes, Confirmed
at Ba2 (sf); previously on Nov 14, 2013 Ba2 (sf) Placed Under
Review for Possible Downgrade
Issuer: BANKINTER 4, FTH
....EUR987.6M A Notes, Affirmed
Baa2 (sf); previously on Mar 15, 2013 Downgraded to Baa2 (sf)
....EUR21.5M B Notes, Downgraded
to Ba2 (sf); previously on Nov 14, 2013 Ba1 (sf) Placed Under
Review for Possible Downgrade
....EUR15.9M C Notes, Confirmed
at B2 (sf); previously on Nov 14, 2013 B2 (sf) Placed Under
Review for Possible Downgrade
Issuer:BANKINTER 7, FTH
....EUR471.8M A Notes, Affirmed
Baa1 (sf); previously on Mar 20, 2013 Downgraded to Baa1 (sf)
....EUR13M B Notes, Downgraded to Ba3
(sf); previously on Nov 14, 2013 Ba2 (sf) Placed Under Review
for Possible Downgrade
....EUR5.2M C Notes, Affirmed
B3 (sf); previously on Mar 20, 2013 Downgraded to B3 (sf)
Issuer: BANKINTER 9, FTA
....EUR656M A2 (P) Notes, Affirmed Baa1
(sf); previously on Mar 20, 2013 Confirmed at Baa1 (sf)
....EUR244.2M A2 (T) Notes, Affirmed
A3 (sf); previously on Mar 20, 2013 Confirmed at A3 (sf)
....EUR15.3M B (P) Notes, Downgraded
to B1 (sf); previously on Nov 14, 2013 Ba3 (sf) Placed Under
Review for Possible Downgrade
....EUR17.2M B (T) Notes, Affirmed
Baa3 (sf); previously on Mar 20, 2013 Downgraded to Baa3 (sf)
....EUR7.1M C (P) Notes, Affirmed
B3 (sf); previously on Mar 20, 2013 Downgraded to B3 (sf)
....EUR7M C (T) Notes, Confirmed at
Ba2 (sf); previously on Dec 4, 2013 Ba2 (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.
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 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.
Maria Turbica Manrique
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
Christophe de Noaillat
MD - Structured Finance
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 downgrades 3 notes and confirms 3 notes in 4 Bankinter Spanish RMBS transactions