London, 29 April 2013 -- Moody's Investors Service has today downgraded the ratings of one senior
note and four junior notes in three Spanish residential mortgage-backed
securities (RMBS) transactions: TDA 29, FTA; TDA 31,
FTA and Unicaja TDA VPO, FTA. At the same time, Moody's
confirmed the ratings of two senior notes in TDA 29, FTA and TDA
31, FTA respectively.
Today's rating action concludes the review of seven notes placed
on review on 23 November 2012, following Moody's revision
of key collateral assumptions for the entire Spanish RMBS market http://www.moodys.com/research/Moodys-review-of-Spanish-RMBS-sector-triggers-rating-actions-on--PR_260528.
For a detailed list of affected ratings, see towards the end of
the ratings rationale section.
RATINGS RATIONALE
Today's downgrade action primarily reflects the insufficiency of credit
enhancement to address sovereign risk as well as linkage to counterparty.
Moody's confirmed the ratings of securities whose credit enhancement
and structural features provided enough protection against sovereign and
counterparty risk. The linkage to counterparty risk is the primary
driver in today's rating action for Unicaja TDA VPO, FTA.
The determination of the applicable credit enhancement driving today's
rating actions reflects the introduction of additional factors in Moody's
analysis to better measure the impact of sovereign risk on structured
finance transactions (see "Structured Finance Transactions:
Assessing the Impact of Sovereign Risk", 11 March 2013).
This report is available on www.moodys.com and can be accessed
via the following link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988
.
-- Additional Factors Better Reflect Increased Sovereign
Risk
Moody's has supplemented its analysis to determine the loss distribution
of securitised portfolios with two additional factors, the maximum
achievable rating in a given country (the local currency country risk
ceiling) and the applicable portfolio credit enhancement for this rating.
With the introduction of these additional factors, Moody's
intends to better reflect increased sovereign risk in its quantitative
analysis, in particular for mezzanine and junior tranches.
The Spanish country ceiling, and therefore the maximum rating that
Moody's will assign to a domestic Spanish issuer including structured
finance transactions backed by Spanish receivables, is A3.
Moody's Individual Loan Analysis Credit Enhancement (MILAN CE) represents
the required credit enhancement under the senior tranche for it to achieve
the country ceiling. By lowering the maximum achievable rating
for a given MILAN, the revised methodology alters the loss distribution
curve and implies an increased probability of high loss scenarios.
-- Revision of Key Collateral Assumptions
Moody's has maintained its lifetime loss expectation (EL) as well as its
MILAN CE assumption in all three transactions. Expected loss assumptions
remain at 3.5% TDA 29, FTA, 5.34%
for TDA 31, FTA and 1.4% for Unicaja TDA VPO,
FTA. The MILAN CE assumptions remain at 15% for TDA 29,
FTA, 20.4% for TDA 31, FTA and 10% for
Unicaja TDA VPO, FTA.
-- Exposure to Counterparty Risk
The conclusion of Moody's rating review takes into consideration
the exposure to Unicaja Banco (Ba1 on review for possible downgrade),
which still acts as collection account bank, reinvestment account
bank , issuer account bank and swap counterparty for Unicaja TDA
VPO, FTA. Moody's concludes that the commingling loss
due to the exposure to Unicaja bank is negatively affecting the rating
of the senior note and is a driver of today's downgrade.
Moody's also notes that, following the breach of the second
rating trigger, the swap does not comply with Moody's de-linkage
criteria, however the revised rating of the notes are not negatively
impacted by this exposure.
-- Other Developments May Negatively Affect the Notes
In consideration of Moody's new adjustments, any further sovereign
downgrade would negatively affect structured finance ratings through the
application of the country ceiling or maximum achievable rating,
as well as potentially increased portfolio credit enhancement requirements
for a given rating.
As the euro area crisis continues, the ratings of structured finance
notes remain exposed to the uncertainties of credit conditions in the
general economy. The deteriorating creditworthiness of euro area
sovereigns as well as the weakening credit profile of the global banking
sector could further negatively affect the ratings of the notes.
Moody's describes additional factors that may affect the ratings
in "Approach to Assessing Linkage to Swap Counterparties in Structured
Finance Cashflow Transactions: Request for Comment" (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF289772),
published on 2 July 2012.
METHODOLOGIES
The methodologies used in these ratings were Moody's Approach to Rating
RMBS Using the MILAN Framework" published in March 2013 and "The
Temporary Use of Cash in Structured Finance Transactions: Eligible
Investment and Bank Guidelines" published in March 2013.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
In reviewing these transactions, Moody's used its cash flow model,
ABSROM, to determine the loss for each tranche. The cash
flow model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, Moody's calculates
the corresponding loss for each class of notes given the incoming cash
flows from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss for each tranche is the sum product
of (1) the probability of occurrence of each default scenario and (2)
the loss derived from the cash flow model in each default scenario for
each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
In the context of the rating review, the transactions have been
remodeled and some inputs have been adjusted to reflect the new approach
described above. In addition, for TDA 29, FTA Moody's
corrected the input for Class A2 and C note margin.
LIST OF AFFECTED RATINGS
Issuer: TdA 29 Fondo de Titulizacion de Activos
....EUR435M A2 Notes, Confirmed at Baa2
(sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf) and
Remained On Review for Possible Downgrade
....EUR17.4M B Notes, Downgraded
to B2 (sf); previously on Nov 23, 2012 Downgraded to B1 (sf)
and Remained On Review for Possible Downgrade
....EUR9.3M C Notes, Downgraded
to Caa3 (sf); previously on Nov 23, 2012 Downgraded to Caa2
(sf) and Remained On Review for Possible Downgrade
Issuer: TDA 31, Fondo de Titulizaci?n de Activos
....EUR280.5M A Notes, Confirmed
at Baa1 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR6M B Notes, Downgraded to Ba2
(sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf) and
Remained On Review for Possible Downgrade
....EUR13.5M C Notes, Downgraded
to Caa3 (sf); previously on Nov 23, 2012 Downgraded to Caa2
(sf) and Remained On Review for Possible Downgrade
Issuer: UNICAJA TDA VPO
....EUR188.8M A Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
REGULATORY DISCLOSURES
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.
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.
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.
Sebastian Hoepfner
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Barbara Rismondo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Steven Becker
Associate Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades 5 notes and confirms 2 note in two TDA and one Unicaja transactions