Mexico, September 20, 2010 -- Moody's de México (Moody's) has downgraded Hipotecaria Su Casita,
S.A. de C.V. Sociedad Financiera de Objeto
Múltiple E.N.R.'s (Su Casita's) HSCCB 08 Senior
Certificates (Trust #536). The certificates are secured primarily
by the securitization trust's credit rights in construction loans originated
by Hipotecaria Su Casita, S.A. de C.V.
Sociedad Financiera de Objeto Múltiple E.N.R.
(Su Casita) and granted to developers for the financing of construction
of residential housing in Mexico, and any cash or permitted investments
held as part of the trust.
The complete rating action is as follows:
Originator and Servicer: Hipotecaria Su Casita, S.A.
de C.V. Sociedad Financiera de Objeto Múltiple E.N.R.
Issuer: The Bank of New York Mellon, S.A.,
acting solely as trustee.
-- HSCCB 08 Series A Certificates: downgraded to Caa2.mx
(sf) from Ba2.mx (sf) (Mexican National Scale) and to Caa2 (sf)
from B2 (sf) (Global Scale, Local Currency). The last rating
action occurred on June 25, 2010 when the certificates' ratings
were downgraded to Ba2.mx (sf) from Baa3.mx (sf) and to
B2 (sf) from B1 (sf).
Today's rating action is primarily based on Moody's recent downgrade of
Hipotecaria Su Casita's ratings, the revolving nature of the transaction
and its weak performance to date.
Under Moody's rating approach (updated in August 2009), and absent
certain structural protections detailed in our rating methodology,
Moody's considers the rating of revolving construction loan securitizations
to be highly linked to the rating of the originator and servicer of the
assets. This is due to the revolving nature of the transactions
and the intensive servicing efforts associated with construction loans.
On September 13, 2010, Moody's downgraded Su Casita's
global scale local currency issuer rating to Caa2 from B2 (national scale
issuer rating downgraded to Caa2.mx from Baa3.mx),
and placed these ratings on review for further possible downgrade.
These rating actions follow the announcement on September 10th that negotiations
with BBVA Bancomer to purchase a portion of Su Casita's loan portfolio
had ceased due to an inability to reach agreement on valuation.
Su Casita's current liquidity position is weak, as the company has
sufficient funds available to cover existing debt only through the middle
of 1Q 2011, at which time the company would suffer a liquidity shortfall.
The transaction has a slow pace of homes sales, pool amortization
and construction across certain projects. As a result, many
of the loans included in the transaction are likely to require extensions
to their original maturity date, which increases the risk that the
loans may not fully amortize by the transaction's final maturity date.
In addition, the transaction has a high concentration of loans outside
the low-income housing sector, which may contribute to a
slower pace of home sales as compared to the low-income housing
sector that benefits from more readily available mortgage financing.
Moody's notes that the transaction's legal final maturity is in March
2014, and that the revolving period ends 18 months prior to the
maturity date, at which point the certificates begin to amortize.
Any additional loans added during the remaining revolving period may also
need extensions to their maturity dates, given the current slowdown
in sales and construction completion rates. As of August 2010,
the senior certificates' had gross credit enhancement of 22% in
the form of overcollateralization and cash holdings to protect against
extension and default risk.
According to Su Casita, on August 17, 2010, investors
approved a proposal to end the transaction's revolving period.
Su Casita expects that the relevant modifications to the trust agreement
in order to end the revolving period will be completed in the near term.
However, these modifications have not yet been formalized as of
Regarding the variability of the certificate ratings, Moody's
notes that any further downgrades to Su Casita's issuer ratings
would not, in and of themselves, necessarily result in a further
downgrade of the certificates in order to link their ratings to Su Casita's
issuer ratings. Instead, Moody's monitoring will focus
on the expected recoveries on the certificates and on the underlying construction
loan portfolio, whose composition may change through time given
the revolving nature of the transaction.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which the pace of residential home sales in certain
markets have slowed down considerably.
The principal methodology used in rating these securities was "Moody's
Approach to Rating Low-Income Residential Construction Loan Securitizations
in Mexico" published in August 2009. Other methodologies and factors
that may have been considered can also be found on Moody's website.
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 Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past 6 months.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's de Mexico S.A. de C.V
Moody's downgrades Su Casita's HSCCB 08 Mexican construction loan securitization to Caa2.mx (sf)
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000