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Rating Action:

Moody's downgrades GC FTPYME PASTOR 4, FTA Spanish SME ABS notes

03 Aug 2011

Updates on the ABS notes issued by Pastor 3, Pastor 6 and Pastor 9

Frankfurt am Main, August 03, 2011 -- Moody's Investors Service has today downgraded the ratings of the class A2 and class A3G notes issued by GC FTPYME PASTOR 4, FTA (Pastor 4). At the same time, Moody's has reviewed EdT FTPYME PASTOR 3, FTA (Pastor 3), GC FTPYME PASTOR 6, FTA (Pastor 6) and TDA FTPYME PASTOR 9, FTA (Pastor 9) and has taken no action as a result of this review. The four transactions are Spanish small and medium-sized enterprise asset-backed securities (SME ABS) originated by Banco Pastor, S.A. (rated Ba1/NP, outlook negative). Today's rating action concluded the rating review of Pastor 4, which followed the implementation of Moody's rating guidance entitled "Global structured Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk" on 2 March 2011. A detailed list of rating actions can be found at the end of this press release.

RATINGS RATIONALE

Today's rating action reflects the continued lack of liquidity in Pastor 4, which persists despite amendments made by the transaction parties to the deal documentation. The amendments included the appointment of a back-up servicer (BUS) and were designed to mitigate operational risk. There is no liquidity facility and the reserve fund has been fully depleted since July 2010.

-- INCLUSION OF BACK-UP SERVICER

In its analysis, Moody's took into account the implementation of a back-up servicer (BUS) agreement which mitigated the transactions' operational risk and limited the migration of senior notes in Pastor 4. The BUS agreement has been signed on 27 July 2011.

Under the signed BUS agreements, EOS Spain will act as the new servicer upon the request from the management company (GestiCaixa). EOS Spain is a debt collection company. It employs over 150 employees and includes banks, utilities and telephone companies among its clients. EOS Spain already manages all delinquent loans of Banco Pastor's portfolio. EOS Spain is one of the 43 companies under the EOS Group umbrella. The EOS Group, a subsidiary of the Otto Group, was formed in 1974 and its headquarters are in Germany. The EOS Group is a financial service provider covering three business units: information management, arrears management and receivables management. The EOS Group and its parent, the Otto Group, are non-rated entities. EOS Spain commits to act as back-up servicer within six month of receiving the request from the management company. As a result, Moody's considers the transition period to the BUS to be completed in a maximum of 2 quarterly payment dates. Moody's also notes that the management company will coordinate the appointment of replacement servicer if the primary servicer or BUS are not able to perform their duties. The management company also acts as an independent cash manager and will be able to use available funds, including reserve fund, to support timely payments on the notes in case of a temporary servicer disruption.

As a result, Moody's considers that: (i) the BUS transition period would be completed within six months; and (ii) payment disruption due to the lack of liquidity would be consistent with a rating in the Aa range.

EOS Spain was also appointed as BUS in Pastor 3 and Pastor 9. Both transactions benefit from liquidity via the reserve fund accounting for 9% and 17% of current portfolio balance, respectively. The BUS agreement in Pastor 9 has been signed on 21 July 2011. Moody's has been informed that the BUS agreement in Pastor 3 should be signed shortly. Moody's will monitor the situation. Under the revised operational guidance, 6-9 months of senior interest and costs, approximately equal to 2% of pool balance, is sufficient for payment continuity on highly rated securities. The performance of Pastor 3 and Pastor 9 is in line with expectations.

No BUS has been appointed in Pastor 6. Moody's has been informed by the management company (GestiCaixa) that the notes will be repaid via extraordinary call on 15 September 2011.

--POOR PERFORMANCE IN PASTOR 4

As part of its review, Moody's conducted a detailed analysis of Pastor 4 performance, which has been worse than expected. Indeed, at the end of June 2011, 90-day to 18-month delinquencies were equal to 6.3% of the current pool balance, cumulative 90+ day delinquencies stood at 15.2% of the original balance, while the cumulative write-offs had reached 4.5% of the original pool balance. Historically, this transaction has under-performed Moody's Spanish SME delinquency index ("Spanish SME Indices - March 2011"). As of March 2011, 90- to 360-day delinquencies represented 5.2% of the current pool balance, compared with the weighted average index of 2.2%. Furthermore, the reserve fund has been fully depleted since July 2010 and an amortisation deficit (PDL) of 8.4 million recorded in July 2011.

--KEY REVISED ASSUMPTIONS IN PASTOR 4: CUMULATIVE DEFAULT, VOLATILITY AND RECOVERY

Moody's used the "top-down" approach to derive the default-rate assumption, whereby an average through-the-cycle rating for Spanish SMEs is determined and the rating is then adjusted on a loan-by-loan basis by considering various factors, including the borrower sector, repayment profile and the broader economic environment. As part of the review, Moody's has considered the exposure of the transaction to the real estate sector (24% of the current pool). The deterioration of the Spanish economy has been reflected in the negative sector outlook Moody's published on the Spanish SMEs securitisation transactions (please refer to Moody's report entitled "EMEA ABS & RMBS Asset Performance Outlooks -- July 2011 Update", published in July 2011).

As a result of the above, Moody's assumes the default probability of SME debtors to be equivalent to a rating in the single B-range for debtors operating in the real estate sector and in the low Ba-range for the non-real-estate debtors. At the same time, Moody's estimated the remaining weighted average life of the portfolio to equal 4.5 years. Consequently, the revised cumulative mean default assumption for this transaction has increased to 23% of the current portfolio balance (corresponding to 9.3% of original portfolio balance).

Given that the pool is less granular (with an effective number of borrowers of 233), Moody's used a Monte Carlo simulation in CDOROM to derive the gross default distribution. As a result, Moody's revised the coefficient of variation of its default distribution to 34%. Moody's assumptions for the average recovery rate and constant prepayment rate (CPR) remain unchanged at 45% and 5%, respectively.

Although the quantitative rating model outcome is still equivalent to Aaa, the downgrade of the Pastor 4 senior notes reflects the lack of liquidity. Moreover, based on current pace of amortisation, the class A2 notes would be repaid in less than nine months, which reduces the exposure of the class A2 notes to disruption risk. The class A3G notes would start to amortise only once class A2 is redeemed. As such, Moody's today downgraded the class A2 notes into the high Aa-range, to Aa1 (sf) from Aaa (sf) and class A3G to Aa2 (sf) from Aaa (sf), taking into account the different amortisation pace of both notes.

The model outcome is consistent with current ratings on subordinated notes.

Class A3G notes in Pastor 4 benefit from the guarantee of the Government of Spain (Aa2, on review for downgrade) for interest and principal payments. However, Moody's has determined that the intrinsic credit risk of class A3G notes without the government guarantee would today be consistent with a Aa2 rating.

The principal methodology used in this rating was Moody's Approach to Rating CDOs of SMEs in Europe published in February 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology .

Other methodologies used in this rating were Refining the ABS SME Approach: Moody's Probability of Default assumptions in the rating analysis of granular Small and Mid-sized Enterprise portfolios in EMEA published in March 2009 and Moody's Approach to Rating Granular SME Transactions in Europe, Middle East and Africa published in June 2007.

Moody's used its excel-based cash flow model, Moody's ABSROM™, as part of its quantitative analysis of the transaction. Moody's ABSROM™ model enables users to model various features of a standard European ABS transaction including: (i) the specifics of the default distribution of the assets, their portfolio amortisation profile, yield or recoveries; and (ii) the specific priority of payments, triggers, swaps and reserve funds on the liability side of the ABS structure. Moody's ABSROM™ User Guide is available on Moody's website and covers the model's functionality as well as providing a comprehensive index of the user inputs and outputs. MOODY'S CDOROMv2.8™ was used to estimate the default distribution.

RATING LIST

Issuer: GC FTPYME PASTOR 4, FTA

EUR256.6 million Class A2: Downgraded to Aa1(sf) from Aaa(sf), previously on 2 March 2011 placed on review for downgrade

EUR50 million Class A3G: Downgraded to Aa2(sf) from Aaa(sf), previously on 2 March 2011 placed on review for downgrade

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.

The lead analyst and rating office for each of the transactions affected are generally different from the contact and office listed at the end of this press release. For each transaction, the lead analyst name is available on the issuer page and the rating office is available on the ratings tab of the issuer on www.moodys.com.

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.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the credit rating action. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Frankfurt am Main
Yuezhen Wang
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades GC FTPYME PASTOR 4, FTA Spanish SME ABS notes
No Related Data.
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