Moody's also downgrades two transactions with exposure to Spanish Banks
London, 02 July 2012 -- Moody's Investors Service announced today that it has downgraded the ratings
of structured finance securities indirectly exposed to the declining credit
quality of certain US and European banks with global capital market operations
which Moody's downgraded on June 21, 2012. Moody's
also downgraded two repackaged transactions linked to the credit quality
of two Spanish banks, Banco Santander S.A. and Banco
Bilbao Vizcaya Argentaria SA, which Moody's downgraded on
June 25, 2012. Today's rating actions affect 75 repackaged
securities in Europe, and one residential mortgage bond tranche.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290300
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
For additional information on structured finance ratings, please
refer to the webpage containing Moody's related announcements http://www.moodys.com/eusovereign
RATINGS RATIONALE
The reason for Moody's actions is the linkage between the ratings of the
structured finance securities and those of the banks. This linkage
is due to the exposure of the structured finance securities to the declining
credit quality of certain European and US banks each of which acts as
either the swap counterparty, the guarantor of the securities,
the issuer of collateral securities, or the reference credit in
the transaction. Each related swap counterparty, underlying
security, guarantor or reference entity is detailed in the excel
link at the beginning of this announcement.
These transactions are generally standard repackaged transactions or credit
linked notes. In 65 of the transactions, there is a swap
embedded in the structure, whereby the swap counterparty ultimately
pays what is due under the notes. The remaining transactions have
exposure in the form of either the issuer of the collateral, the
issuer of the transaction, the guarantor or the reference entity.
In each case the risk is strongly linked to one of the downgraded banks
in some form, and the impact of such linkage on each rating is assessed
by either an expected loss calculation by overlaying the default risk
of counterparty onto the default risk of the referenced credit,
or by passing through the rating of the underlying entity. Each
related affected entity, the role they perform, and a description
of the quantitative analysis if used in each deal is detailed in the link
at the beginning of this announcement (see columns N, O, and
Q).
For further information on the underlying action see the press release,
"Moody's downgrades firms with global capital markets operations" on www.moody.com.
Moody's notes that these transactions are subject to a high level of macroeconomic
uncertainty, which could negatively impact the ratings of the notes,
as evidenced by 1) uncertainties of credit conditions in the general economy
and 2) the acute sovereign and banking crisis in the euro area,
which is weakening the credit profiles of banks exposed to the currency
union. This crisis accentuates challenges facing banks globally.
For more information please refer to "Moody's: Global bank ratings
likely to decline in 2012" and "Key Drivers of Rating Actions on Firms
with Global Capital Markets Operations."
As the Euro area crisis continues, the rating of the 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 negatively impact the ratings of the notes.
The principal methodology used in these ratings was "Moody's Approach
to Rating Repackaged Securities" published in April 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
As described in the link (column Q), certain transactions utilize
expected loss calculation as described below. For these transactions
Moody's also considered various sensitivity scenarios including a consideration
of different recoveries upon default. In all cases, the corresponding
outcomes are consistent with the rating assigned today.
Moody's quantitative analysis of Repacks is designed to estimate the expected
loss "EL" borne by the Repack investor, given the transaction structure,
the Collateral and any other credit risks arising under the transaction.
To this end, Moody's relies on an EL analysis in which we identify
and attach probabilities to events that might give rise to losses to Repack
noteholders.
Moody's EL calculation assesses the probability and severity of each possible
loss-inducing event happening at discrete (typically one-year)
intervals through the life of the transaction. The EL for each
of these time points can then be aggregated to provide a weighted-average
EL for the rated notes.
For the remaining transactions, no additional cash flow analysis
or stress scenarios have been conducted (also noted in column Q in the
excel link) as the rating was directly derived from the rating of the
relevant affected entities.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290300
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Lead Analyst
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 ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information source used to prepare the rating is the following:
public 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 these transactions in the past
six months.
Moody's considers the quality of information available on the rated entities,
obligations or credits satisfactory for the purposes of issuing these
ratings.
Moody's adopts all necessary measures so that the information it uses
in assigning the ratings 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their 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
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst and the office that
has issued the credit rating.
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
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
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.
Mariona?Serrat
Associate 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
Neelam S. Desai
Senior Vice President
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 European structured finance transactions indirectly exposed to banks with global capital markets operations
