London, 22 May 2013 -- Moody's Investors Service has today downgraded the ratings of two senior
and two junior notes and confirmed the ratings of one junior note in three
Spanish residential mortgage-backed securities (RMBS) transactions:
Foncaixa Consumo 1, FTA, TDA Tarragona 1, FTA and Unicaja
Andalucia FTVivienda TDA 1, FTA. Insufficiency of credit
enhancement to address sovereign risk, deterioration in collateral
performance and exposure to issuer account bank prompted today's downgrades.
Today's rating action concludes the review of one note placed on
review on 2 July 2012, following Moody's downgrade of Spanish
government bond ratings to Baa3 from A3 on 13 June 2012. This rating
action also concludes the review of four notes placed on review on 23
November 2012, following Moody's revision of key collateral assumptions
for the entire Spanish RMBS market (http://www.moodys.com/research/Moodys-review-of-Spanish-RMBS-sector-triggers-rating-actions-on--PR_260528).
See towards the end of the ratings rationale section of this press release
for a detailed list of affected ratings.
RATINGS RATIONALE
Today's downgrades reflect primarily the insufficiency of credit enhancement
to address sovereign risk. Furthermore, Moody's took
into consideration the exposure to Unicaja Banco (Ba1 under review for
downgrade/NP) acting as issuer account bank in Unicaja Andalucia FTVivienda
TDA 1, FTA as well as the deterioration in collateral performance
in the underlying portfolio of TDA Tarragona 1, FTA. Moody's
confirmed the ratings of the junior notes in Foncaixa Consumo 1,
FTA due to sufficient credit enhancement and enough protection from structural
features against sovereign and counterparty risk.
The determination of the applicable credit enhancement that drives today's
rating actions reflects the introduction of additional factors in Moody's
analysis to better measure the impact of sovereign risk on structured
finance transactions (see "Structured Finance Transactions:
Assessing the Impact of Sovereign Risk", 11 March 2013).
This report is available on www.moodys.com and can be accessed
via the following link (http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF319988)
Additional Factors Better Reflect Increased Sovereign Risk
Moody's has supplemented its analysis to determine the loss distribution
of securitised portfolios with two additional factors, the maximum
achievable rating in a given country (the Local Currency Country Risk
Ceiling) and the applicable portfolio credit enhancement for this rating.
With the introduction of these additional factors, Moody's intends
to better reflect increased sovereign risk in its quantitative analysis,
in particular for mezzanine and junior tranches.
The Spanish country ceiling, and therefore the maximum rating that
Moody's will assign to a domestic Spanish issuer including structured
finance transactions backed by Spanish receivables, is A3.
Moody's Individual Loan Analysis Credit Enhancement (MILAN CE) represents
the required credit enhancement under the senior tranche for it to achieve
the country ceiling. By lowering the maximum achievable rating
for a given MILAN, the revised methodology alters the loss distribution
curve and implies an increased probability of high loss scenarios.
-- Revision of Key Collateral Assumptions
Moody's has increased its lifetime expected loss (EL) assumption
in TDA Tarragona 1, FTA to 9% from 7.7%.
The revision follows further deterioration in collateral performance with
loans in arrears more than 90 days standing at 5.59% in
March 2013, which constitutes a significant increase from 4.08%
in September 2012. In the same period cumulative defaults on original
balance, measured as loans more than 12 months in arrears,
climbed to 7.05% from 5.69%. As a result
of this the current level of the reserve fund dropped to EUR 0.2
million or 1.4% of the reserve fund's target balance
as of March 2013 from EUR 4 million or 30% of its target balance
in September 2012.
At the same time Moody's has maintained the EL assumptions in Foncaixa
Consumo 1, FTA and Unicaja Andalucia FTVivienda TDA 1, FTA
at 2.80% and 4.00% respectively.
During its review Moody's also reassessed the MILAN CE assumptions
of the transactions underlying portfolios based on available loan-by-information.
As a result Moody's increased the MILAN CE in TDA Tarragona 1,
FTA to 23.10% from 20.20%. Moody's
has maintained the MILAN CE assumption in Foncaixa Consumo 1, FTA
and Unicaja Andalucia FTVivienda TDA 1, FTA at 16.30%
and 13.30% respectively.
-- Exposure to Counterparty
Moody's rating review has taken into consideration the exposure
to Unicaja Banco acting as issuer account bank and swap counterparty in
Unicaja Andalucia FTVivienda TDA 1, FTA. Moody's concluded
that the transaction's exposure to Unicaja Banco in its role as issuer
account bank has a negative effect on the outstanding ratings as the reserve
fund is the only source of hard credit enhancement in the structure and
a main provider of liquidity. In Moody's view the negative
impact on the liquidity profile of the transaction is partially mitigated
by the class A2(G)'s guarantee provided by the Regional Government
of Andalusia (Ba2). Moody's also concluded that the transaction's
exposure to Unicaja Banco in its role as swap counterparty is not negatively
impacting the current ratings. Moody's also analysed the exposure
to Banco Santander S.A. (Spain) (Baa2/P-2) acting
as issuer account bank and to CECABANK S.A. (Ba1 under review
for downgrade/NP) acting as swap counterparty in TDA Tarragona 1,
FTA. Moody's concluded that these risks do not have a negative
impact on the outstanding ratings.
-- Other Developments May Negatively Affect the Notes
In consideration of Moody's new adjustments, any further sovereign
downgrade would negatively affect structured finance ratings through the
application of the country ceiling or maximum achievable rating,
as well as potentially increase portfolio credit enhancement requirements
for a given rating.
As the euro area crisis continues, the ratings of 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 further negatively affect the ratings of the notes.
Moody's describes additional factors that may affect the ratings
in "Approach to Assessing Linkage to Swap Counterparties in Structured
Finance Cashflow Transactions: Request for Comment" (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF289772),
published on 2 July 2012.
The methodologies used in these ratings were Moody's Approach to Rating
RMBS Using the MILAN Framework published in March 2013 and The Temporary
Use of Cash in Structured Finance Transactions: Eligible Investment
and Bank Guidelines published in March 2013. Please see the Credit
Policy page on www.moodys.com for a copy of these methodologies.
In reviewing these transactions, Moody's used ABSROM to model the
cash flows and determine the loss for each tranche. The cash flow
model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
In the context of the rating review, the transactions have been
remodeled and some inputs have been adjusted to reflect the new approach
described above.
LIST OF AFFECTED RATINGS
Issuer: Foncaixa Consumo 1, FTA
....EUR462M B Notes, Confirmed at Ba3
(sf); previously on Jul 2, 2012 Ba3 (sf) Placed Under Review
for Possible Downgrade
Issuer: TDA TARRAGONA 1
....EUR359.7M A Notes, Downgraded
to Ba3 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR11.1M B Notes, Downgraded
to Caa2 (sf); previously on Nov 23, 2012 Downgraded to B1 (sf)
and Remained On Review for Possible Downgrade
....EUR11.9M C Notes, Downgraded
to Caa3 (sf); previously on Nov 23, 2012 Downgraded to Caa1
(sf) and Remained On Review for Possible Downgrade
Issuer: Unicaja Andalucia FTVivienda TDA 1, FTA
....EUR160M A2(G) Notes, Downgraded
to Baa2 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
REGULATORY DISCLOSURES
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.
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
certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sebastian Hoepfner
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
Barbara Rismondo
Senior Vice President/Manager
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 four and confirms one Spanish RMBS tranches
