EUR42.5 million of rated securities affected
Frankfurt am Main, June 10, 2011 -- Moody's Investors Service has today downgraded the class C notes issued
by GC FTGENCAT CAIXA TARRAGONA 1, Fondo de Titulización de
Activos, Spanish SME ABS (CAIXA TARRAGONA 1). The ratings
of class AG and AS remain on review for downgrade pending the outcome
of proposals by the transactions' sponsors to mitigate operational risk.
At the same time, we confirmed the rating of class B. A list
of the ratings affected by today's action can be found at the end of this
press release.
RATINGS RATIONALE
Today's rating action concludes the review that Moody's initiated in November
2010 due to weaker-than-expected performance. Moody's
analysis also took into account the credit quality of the underlying SME
loan portfolio. Based on this analysis, the rating agency
determined: (i) its cumulative default and recovery rate; and
(ii) its volatility assumption. The analysis also took into account
the transaction structure, as assessed under Moody's cash flow analysis.
The expected cumulative default-rate and volatility assumptions
are the two key parameters that the rating agency uses to calibrate its
default distribution curve, which in turn is included in the cash
flow model used to rate European ABS transactions.
-- PERFORMANCE
Historically, this transaction has generally performed in line with,
or better than, Moody's Spanish SME delinquency index ("Spanish
SME March 2011 Indices", May 2011). As of March 2011,
90- to 360-day delinquencies represented 1.1%
of the current pool balance, compared with an index average of 2.2%.
As of April 2011, cumulative 90-day delinquencies stood at
6.5% of the original balance plus replenishment.
This compares to an initial default assumption of 12.0%,
while the pool factor is at 59.2% of the original balance
plus replenishment. As of the last reporting date, the reserve
fund was drawn (85.5% of its target) and cumulative write-offs
had reached 2.4% of the original pool balance. Ninety-day
to 12-month delinquencies now stand at 0.9% of the
current pool balance.
-- KEY REVISED ASSUMPTIONS: CUMULATIVE DEFAULT,
VOLATILITY AND RECOVERY
Moody's has reassessed its lifetime default expectation for CAIXA TARRAGONA
1's collateral pool. This reassessment factored in the weak collateral
performance to date and any likely further performance deterioration of
the pool in the current down cycle. In doing so, the rating
agency took into account the transaction's exposure to the real-estate
market (33.3% of the current pool according to Moody's
classification).
Moody's assumes a default probability for SME debtors operating in the
real-estate sector to be equivalent to a rating in the single-B
range. This takes into account the rating agency's outlook for
the Spanish real-estate sector. Moody's also assumes the
default probability of non-real-estate debtors to be in
the low Ba/high B range and estimates the remaining weighted-average
life of the portfolio to be 4.1 years. Consequently,
these revised assumptions have translated into a rise in the cumulative
mean default assumption for the current portfolio, equal to 16.5%
of the current portfolio balance. This default assumption corresponds
to an equivalent rating of B2 over the portfolio weighted average life.
This implies a revised cumulative mean default for the entire transaction
(since closing) equal to 15.8% of the total securitised
pool, compared with 12% at closing.
The portfolio includes a large exposure to a few borrowers, with
the largest borrower representing 3.4% of the portfolio,
and the top 5 and top 10 borrowers representing 12.7% and
17.1%, respectively. Moody's made a conservative
assumption of the default probability equivalent to a Caa2 rating of the
borrowers, which represented more than 2% of the pool.
Given the pool heterogeneity (with an effective number of borrowers of
190), Moody's used a Monte Carlo simulation to derive the gross
default distribution. As a result of the simulation, the
coefficient of variation reached 50%, compared with 60%
at closing. The prepayment rate was reduced to 5% from a
7% assumption at closing.
Moody's now assumes a 60% stochastic recovery rate, compared
with a 60% fixed recovery rate assumed at closing. This
revised assumption: (i) takes into consideration the fact that 85%
of the portfolio benefits from a mortgage guarantee; and (ii) factors
in an analysis of the real-estate collateral's nature and value.
Moody's analysed various sensitivities of cumulative default rates to
test the robustness of its revised ratings. For instance,
Moody's observed that the quantitative/model-indicated rating outcome
of the class AS, AG and B notes would remain consistent with the
revised rating if the mean default assumptions increased up to 18.0%
of its revised value (19.5% vs. 16.5%
base case assumption).
-- OPERATIONAL AND COUNTERPARTY RISK
Following the downgrade of the transaction servicer, Catalunya Caixa,
to Ba1/NP from A3/P-2 in March 2011, the transaction documents
contemplate the appointment of a back-up servicer. Moody's
has been informed by the transaction's management company (gestora) that
they have engaged in discussions with a potential party to act as back-up
servicer. As a result, Moody's maintains on review for downgrade
the ratings of the class AG, AS notes pending the outcome of the
proposal related to the back-up servicing arrangement.
-- TRANSACTION
CAIXA TARRAGONA 1 is a securitisation of loans granted to SMEs in Catalonia
that closed in June 2008. In April 2011, the portfolio comprised
1,881 loans. Most of the loans were originated between 2004
and 2008. The portfolio is 100% exposed to the region of
Catalonia and tranche AG benefits from a guarantee from the Generalitat
de Catalunya.
RATINGS LIST
....EUR25.7M B Certificate, Confirmed
at A3(sf); previously on 10 November 2010, A3(sf) Placed on
Review for Downgrade
....EUR16.8M C Certificate, Downgraded
to B2(sf); previously on 10 November 2010, Baa3(sf) Placed
on Review for Downgrade
PREVIOUS RATING ACTIONS AND PRINCIPAL METHODOLOGIES
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The principal methodology used in this rating was Moody's Approach to
Rating CDOs of SMEs in Europe published in February 2007. The other
methodologies used 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.
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 six month.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agent
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service 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 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 www.moodys.com/disclosures on our
website for further information.
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.
Frankfurt am Main
Ludovic Thebault
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 notes in GC FTGENCAT CAIXA TARRAGONA 1, FTA, Spanish SME ABS
