EUR472.8 million of securities affected
Milan, February 24, 2010 -- Moody's Investors Service today downgraded the ratings of the Series A,
B, C, and D notes issued by AyT Caixa Galicia Empresas I,
FTA (AyT Caixa Galicia Empresas I), to Aa1, A3, Ba3,
Caa3, from Aaa, Aa3, A3, and Ba3, respectively.
A detailed list of the rating actions can be found at the end of this
Today's rating action concludes the review for possible downgrade
initiated on 23 March 2009. All the aforementioned ratings had
been initially assigned definitive ratings by Moody's in November
Moody's initially placed the above-mentioned notes on review
following the introduction of the revised methodology for granular SME
portfolios in Europe, Middle East and Africa (EMEA), as described
in the Rating Methodology report "Moody's Probability of Default
assumptions in the Rating Analysis of Granular Small and Mid-sized
Enterprise Portfolios in EMEA", published on 17 March 2009.
During the review process the transaction performance has deteriorated
and today's downgrades also takes into account the weaker-than-expected
collateral performance of the pool of loans backing the notes, which
led to reserve fund draws over the last 2 quarters.
As part of its review, Moody's considered the potential for
further performance deterioration in the current economic cycle,
and the exposure of the transaction to the real estate sector (either
through security in the form of a mortgage or debtors operating in these
markets). The deterioration of the Spanish economy has been reflected
in Moody's negative sector outlook for Spanish SME securitisation
transactions ("EMEA ABS & RMBS: 2009 Review and 2010 Outlook",
published in January 2010.).
Outstanding 90+ days delinquencies (i.e. the balance
of loans with arrears for more than 90 days) were at 2.0%
of the portfolio current balance, as of January 2010. While
this has fallen from the peak of 2.5% reported in April
2009, Moody's notes that the cumulative balance of defaulted
loans has now increased to 1.0% from 0.8%
in October 2009 (a loan is considered in default if it has been in arrears
for more than 12 months).This would indicate that a significant
portion of 90+ days delinquencies roll over into default.
In addition, the reserve fund has been drawn on several payment
dates, decreasing to 80% of its target balance in January
2010. To date, this transaction has been performing worse
than the Spanish SME index published by Moody's ("Spanish
SME Q3 2009 Indices," November 2009).
Revised default probability assumptions
Moody's first revised its assumption for the default probability
(DP) of the Spanish SME debtors to an equivalent rating in the single
B-range for debtors operating in the building and real estate sector,
and in the low Ba-range for non-real-estate debtors.
As of January 2010, the concentration in the building and real estate
sector was approximately 18% of the pool balance based on loan-level
In addition, Moody's made DP adjustments to reflect the size
of the debtors companies, notching down its rating proxy on a portion
of the debtors to reflect additional default risk associated with micro-sized
Moody's equivalent rating for loans in arrears for more than 30
days was also notched down depending on the length of time the loans had
been in arrears, and it was notched up for those performing loans
not in the building and real estate sector originated prior to 2006,
depending on their actual seasoning.
Following the above-mentioned adjustments, the portfolio's
overall DP equivalent rating was assumed at Ba3/B1. As a result,
considering an estimated weighted-average remaining life of 4.5
years, this translates into an increased cumulative mean default
assumption of 12.5% of the current outstanding portfolio
amount. Expressed as a percentage of the original portfolio balance,
Moody's revised cumulative mean default rate is 8.7%,
compared to an initial assumption of 4.3% at closing.
Moody's also revised the coefficient of variation assumption to
45% from 51%, assuming an implied asset correlation
of around 7% vs. a 5% at closing.
Recovery and other rating assumptions
Moody's has maintained its initial mean recovery expectation of
55%, which takes into account the line-by-line
analysis of the collateral characteristics backing the mortgage loans
(53% of the current portfolio) as well as the lack of recovery
data available. Moody's also tested the sensitivity of results
to recovery assumptions in a 50-60% range. Stochastic
recoveries were modelled assuming a 20% standard deviation.
The constant prepayment rate (CPR) assumption used in Moody's cash
flow model has decreased to 5% from 12% at closing which
is more in line with recently reported prepayment rate data.
Securitised portfolio characteristics
AyT Caixa Galicia Empresas I is a securitisation fund, which purchased
a pool of loans granted to Spanish SMEs by Caixa Galicia. At closing,
in November 2007, the portfolio consisted of 12,671 loans.
The loans were originated between 1989 and 2006, with a weighted
average seasoning of 2.5 years and a weighted average remaining
term of 9.7 years. Geographically, the pool was concentrated
in Galicia (63%), Cataluña (7%), and
Madrid (6%). At closing, the concentration in the
real estate sector was around 19% of the original pool balance.
As of January 2010, the number of loans in the portfolio amounted
to 8,535 and the weighted average remaining term was 9.0
years. The concentration levels per industry and region are similar
to the levels at closing with a slightly lower exposure in the building
and real estate sector equal to 18% of current portfolio,
which is below the sector-average concentration in the SME ABS
portfolios. The pool factor was 54%.
Moody's rating and methodologies
Moody's ratings address the expected loss posed to investors by
the legal final maturity of the notes. Moody's ratings address
only the credit risks associated with the transaction. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
Moody's initially analysed and currently monitors this transaction
using the rating methodology for granular SME transactions in EMEA as
described in the following Rating Methodology reports: "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", March 2009; "Moody's
Approach to Rating Granular SME Transactions in Europe, Middle East
and Africa", June 2007; These reports are available on
www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
website. Further information on Moody's analysis of this
transaction is available on www.moodys.com. In addition,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
Moody's is closely monitoring the transaction. To obtain
a copy of Moody's New Issue Report or periodic Performance Overviews,
please visit Moody's website at www.moodys.com or
contact our Client Service Desk in London (+44-20-7772
Detailed rating actions
- EUR379.6 million series A notes due 2045, downgraded
to Aa1 from Aaa; previously assigned Aaa on 26 November 2007
- EUR41.6 million series B notes due 2045, downgraded
to A3 from Aa3; previously on 23 March 2009 placed under review for
- EUR27.1 million series C notes due 2045, downgraded
to Ba3 from A3; previously on 23 March 2009 placed under review for
- EUR24.5 million series D notes due 2045, downgraded
to Caa3 from Ba3; previously on 23 March 2009 placed under review
VP - Senior Credit Officer
Structured Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
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Moody's downgrades Spanish SME ABS notes of AyT Caixa Galicia Empresas I, FTA
Structured Finance Group
Moody's Investors Service