Frankfurt am Main, October 13, 2011 -- Moody's Investors Service has today downgraded notes issued by (i) Nova
Finance 4, a Portuguese consumer loan asset-backed securities
(ABS) transaction; (ii) Douro SME Series 1; and (iii) Chaves
SME CLO No. 1 (Chaves SME 1). At the same time, Moody's
confirmed the Baa1(sf) rating of the class A notes in Chaves SME 1.
Both Douro SME Series 1 and Chaves SME 1 are Portuguese SME ABS transactions.
This rating action concludes the review of the deals, which had
been pending while Moody's reviewed the ratings on the Portuguese
banks acting as originators and servicers in the three transactions.
Moody's took rating actions on these Portuguese banks on 7 October
2011.
Today's rating action does not affect the class B notes issued by
Douro SME Series 1, which are guaranteed by the European Investment
Fund (EIF). The rating of these notes remains on review for downgrade
pending the conclusion of the review of the guarantee mechanism upon a
servicer disruption. For Chaves SME 1, the rating action
also concludes the review initiated by Moody's on 12 May 2011 in
response to the borrower notification event. A detailed list of
today's rating actions can be found at the end of this press release.
RATINGS RATIONALE
Today's rating action reflects Moody's expectation of increased
operational risk and/or commingling and set-off risk following
the downgrade of the originators and servicers in the three affected Portuguese
ABS transactions.
(1) Nova Finance 4
The rating action on the class A notes takes into account the increased
commingling risk and potential risk that borrowers set off their deposits
against outstanding loans. Moody's assumed three months of
collections to be potentially lost due to commingling risk. In
addition, Moody's assumed that 7% of the pool would
be exposed to set-off risk in an originator insolvency scenario,
as the rating agency was not provided with the actual figure by the originator.
Moody's downgraded the originator, Banco Comercial Portugues
(BCP), to Ba3/NP from Ba1/NP on 7 October 2011. The commingling
and set-off assumptions combined with the new rating of BCP resulted
in the downgrade of the class A notes to Ba2 (sf) from Baa3 (sf).
(2) Douro SME Series 1
Moody's action on the class A notes reflects the increased operational
risk triggered by the loss of Banco BPI investment grade rating.
Moody's downgraded the originator, Banco BPI, to Ba2/NP
from Baa3/P-3 on 7 October 2011. The structure does not
provide for operational risk mitigants, such as a back-up
servicing agreement and sufficient liquidity to offset the increased operational
risk that resulted in the downgrade of the class A notes to Baa1 (sf)
from A3 (sf).
(3) Chaves SME CLO No. 1
The rating action on Chaves SME CLO No. 1 is driven by recent transaction
amendments, which removed the requirement to notify individual borrowers
when the rating of Banco Portugues de Negocios, S.A.
(BPN) fell below Baa3 on 6 April 2011. Moody's further downgraded
the bank's rating to B3 on 7 October 2011, which increased
the linkage between the rating of BPN and the rated notes in this transaction.
In particular, Moody's has taken into consideration the additional
potential losses due to commingling risk (three months of collections)
and set-off risk (around 6%) following a potential insolvency
of BPN, the probability of which has increased as a result of the
bank's downgrade. While the increase in credit enhancement
levels, on the back of portfolio amortisation, offsets rising
commingling risk for the class A notes, it does not do so for the
class B notes. As a result, Moody's has confirmed the
rating of the class A notes at Baa1(sf) and has downgraded the rating
of the class B notes to Ba2 (sf) from Ba1 (sf).
RATINGS LIST
Issuer: NOVA Finance No. 4 Limited
....EUR644M A Notes, Downgraded to Ba2
(sf); previously on Jul 15, 2011 Downgraded to Baa3 (sf) and
Remained On Review for Possible Downgrade
Issuer: SAGRES Sociedade de Titularização de Créditos,
S.A. (Douro SME Series 1)
....EUR445M A Notes, Downgraded to Baa1
(sf); previously on Jul 15, 2011 Downgraded to A3 (sf) and
Remained On Review for Possible Downgrade
Issuer: Chaves SME CLO No. 1
....EUR527.55M A Notes, Confirmed
at Baa1 (sf); previously on Jul 15, 2011 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR21M B Notes, Downgraded to Ba2
(sf); previously on May 12, 2011 Downgraded to Ba1 (sf) and
Placed Under Review for Possible Downgrade
PRINCIPAL METHODOLOGIES
The methodologies used in rating Douro SME Series 1 and Chaves SME CLO
No. 1 were Moody's Approach to Rating CDOs of SMEs in Europe published
in February 2007, 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. The methodology used in rating Nova Finance
4 was Moody's Approach to Rating Consumer Loan ABS Transactions,
published in July 2011. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Other factors used in this rating are described in "Global Structured
Finance Operational Risk Guidelines: Moody's Approach to Analyzing
Performance Disruption Risk", published in June 2011.
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 and the rating office is available on the issuer page on www.moodys.com.
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.
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
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on 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.
Sebastian Schranz
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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 three Portuguese ABS transactions
