London, 06 June 2013 -- Moody's Investors Service has today downgraded the ratings of eight notes
in four Spanish residential mortgage-backed securities (RMBS) transactions:
TDA 14 MIXTO, FTA; TDA 16 MIXTO, FTA; TDA 17 MIXTO,
FTA and TDA 19 MIXTO, FTA. At the same time, Moody's
confirmed the rating of one junior note in TDA 17 MIXTO, FTA.
Today's rating action concludes the review of four notes placed
on review on 2 July 2012, following Moody's downgrade of Spanish
government bond ratings to Baa3 from A3 on June 2012 and four 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. Moody's confirmed
the ratings of securities whose credit enhancement and structural features
provided enough protection against sovereign and counterparty risk.
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 MILAN CE assumption in all four transactions
and maintained its lifetime loss expectation (EL) for TDA 14 MIXTO,
FTA and TDA 19 MIXTO, FTA for both subpools and for TDA 16 MIXTO,
FTA and TDA 17 MIXTO, FTA for subpool B. For a list of the
assumptions please refer to the list for the entire Spanish RMBS sector
published 24 November 2012 in the following link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF308353.
Moody's has changed its lifetime loss expectation (EL) to 0.60%
from 0.50% for subpool A in TDA 16 MIXTO, FTA and
to 0.70% from 0.58% for subpool A in TDA 17
MIXTO, FTA.
-- Exposure to Counterparty Risk
Moody's rating review takes into consideration the exposure to the
relevant servicers acting as collection account bank for the four transactions.
Treasury Accounts are held by Barclays Bank PLC for TDA 14 MIXTO,
FTA, TDA 16 MIXTO, FTA and TDA 17 MIXTO, FTA and BNP
Paribas for TDA 19 MIXTO, FTA. The sweeping frequency to
the treasury account is monthly in TDA 14 MIXTO, FTA and TDA 17
MIXTO, FTA for both subpools, daily, weekly or monthly
depending on the entity in TDA 16 MIXTO, FTA and TDA 19 MIXTO,
FTA. Moody's concluded that the presence of the above account
banks did not impact the ratings.
Moody's also notes that, there is no swap in place to protect
the transactions against interest rate risk for TDA 14 MIXTO, FTA,
TDA 16 MIXTO, FTA and TDA 17 MIXTO, FTA. The revised
rating of the notes are not negatively impacted by this exposure given
the high excess spread on the pool.
-- 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.
The methodologies used in these ratings were "Moody's Approach to Rating
RMBS Using the MILAN Framework", published in May 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.
LIST OF AFFECTED RATINGS
Issuer: TDA 14 MIXTO, FTA
....EUR18.7M B1 Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR8.1M BNC Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
Issuer: TDA 16 MIXTO, FTA
....EUR15.1M B1 Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR9.1M B2 Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
Issuer: TDA 17 MIXTO, FTA
....EUR14M B1 Notes, Downgraded to Baa2
(sf); previously on Jul 2, 2012 A3 (sf) Placed Under Review
for Possible Downgrade
....EUR2.2M B2 Notes, Confirmed
at Baa3 (sf); previously on Jul 2, 2012 Baa3 (sf) Placed Under
Review for Possible Downgrade
Issuer: TDA 19 MIXTO, FTA
....EUR19.2M B Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Confirmed at A3 (sf)
....EUR6M C Notes, Downgraded to Ba2
(sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under Review
for Possible Downgrade
....EUR7.5M D Notes, Downgraded
to B1 (sf); previously on Jul 2, 2012 Ba2 (sf) Placed Under
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.
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.
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
Christophe?de Noaillat
Associate Managing Director
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 8 notes in four Spanish RMBS TDA MIXTO transactions