Downgrade follows amendments that increase linkage with the bank
London, 30 December 2011 -- Moody's Investors Service has today downgraded the following notes of
Daneion 2007-1, a Consumer Finance ABS originated by EFG
Eurobank Ergasias S.A. (Caa2, Negative).
EUR1587.5M Class A Asset Backed Floating Rate Notes due 2027,
Downgraded to B3 (sf) and Remains On Review for Possible Downgrade;
previously on Nov 11, 2011 Ba1 (sf) Placed Under Review for Possible
Downgrade
RATINGS RATIONALE
Today's downgrade follows transaction document amendments that result
in significantly increased linkage between the rating of the notes in
the affected transactions and those of EFG Eurobank. Through amendments
that were executed on 19 December 2011, EFG will now carry out a
number of key transaction roles previously held by external counterparts,
namely (i) Account Bank; (ii) Transaction Manager (both previously
performed by Citibank N.A. rated A1, negative) and
(iii) Swap Counterparty (previously UBS AG rated Aa3, On Watch.)
In addition, many of the structural protections to reduce operational
risks attached to counterparty credit deterioration no longer provide
protection, creating further linkage.
Given the increased operational risks associated with these amendments
(including but not limited to liquidity, account transfers and payment
under the swap following a potential insolvency event of the Servicer),
Moody's has considered the probability of default of the Notes to
be in line with that of EFG (i.e. Caa2). However,
the ratings of the notes are above the bank's rating, as they reflect
high recoveries and therefore a lower expected loss on the notes.
In particular, Moody's considered the large amount of credit
enhancement (approx. 43%) that supports the rated notes
through subordination of junior notes and a Cash Collateral Account of
EUR 150 million).
Moody's did consider in its recovery scenario analysis the increased
risk of losing portions of cash flows and reserves due to potential commingling
and swap related losses, in the stressed scenario associated with
a bank insolvency. In addition, as highlighted in Moody's
analysis of the transaction at closing, the master trust structure
of the transaction and nature of the assets also were considered to further
increase linkage. All in all, the recovery scenario analysis
allowed for a two notch uplift from the current rating of EFG.
The Class A Notes remain on review for possible downgrade, as with
all other Greek structured finance transactions with notes rated from
Ba1 (sf) to B3 (sf) (see "Moody's reviews for downgrade Greek
structured finance transactions", 11 November 2011).
The Greek structured finance review was prompted by an increase in the
risk of a disorderly default. Moody's review will assess
the risk of disorderly default scenarios, and the implications for
structured finance transactions.
Key modelling assumptions, sensitivities, loss and cash flow
analysis and stress scenarios were not the driver of today's downgrade
and were not changed but may be updated in light of the rating review's
conclusions.
The principal methodology used in this rating was Moody's Approach
to Rating Consumer Loan ABS Transactions published in July 2011.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology. The considerations described in this
press release complement the applicable principal methodology.
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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
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 this transaction
in the past six months.
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.
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Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
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page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
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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
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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.
Ariel Weil
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
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Alex Cataldo
Associate Managing Director
Structured Finance Group
Telephone:+39-02-9148-1100
Releasing Office:
Moody's Investors Service Ltd.
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London E14 5FA
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Moody's downgrades Daneion 2007-1, Greek ABS sponsored by EFG Eurobank
