Frankfurt am Main, May 23, 2013 -- Moody's Investors Service has today downgraded the ratings of the Class
B and C notes both in FTPYME TDA 7, FTA and in GC FTGENCAT CAIXA
TARRAGONA 1, FTA. At the same time, Moody's confirmed
the ratings of the Class A1, A2(CA) notes in FTPYME TDA 7,
FTA and the Class AS and AG notes in GC FTGENCAT CAIXA TARRAGONA 1,
FTA. Both transactions are Spanish asset-backed securities
transactions backed by loans to small and medium-sized enterprises
(SME ABS). Banco Guipuzcoano and Catalunya Banc SA (B1/NP) originated
the portfolio of FTPYME TDA 7, FTA and GC FTGENCAT CAIXA TARRAGONA
1, FTA transactions, respectively. The negative rating
actions are prompted by the insufficiency of credit enhancement to address
sovereign 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). Today's rating action concludes the review
for downgrade initiated by Moody's on 02 July 2012.
For a detailed list of the affected rating, see towards the end
of the ratings rationale section.
RATINGS RATIONALE
Today's rating action reflects primarily the impact of sovereign risk.
Both Spanish ABS SME affected by today's rating action are negatively
impacted by the introduction of new adjustments to Moody's modelling
assumptions accounting for the impact of the deterioration of the sovereign's
credit condition. Ratings in both transactions also reflect by
the revision of key collateral assumptions. Moody's confirmed
the ratings of securities whose credit enhancement and structural features
provided enough protection against sovereign and counterparty risk.
-- 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. The portfolio
credit enhancement represents the required credit enhancement under the
senior tranche for it to achieve the country ceiling. By lowering
the maximum achievable rating, the revised methodology alters the
loss distribution curve and implies an increased probability of high loss
scenarios.
Under the updated methodology incorporating sovereign risk on ABS transactions,
loss distribution volatility increases to capture increased sovereign-related
risks. Given the expected loss of a portfolio and the shape of
the loss distribution, the combination of the highest achievable
rating in a country for SF and the applicable credit enhancement for this
rating uniquely determine the volatility of the portfolio distribution,
which is typically measured as the coefficient of variation (COV ) for
ABS transactions. All things equal, a higher applicable CE
for a given rating ceiling or a lower rating ceiling with the same applicable
CE both translate into a higher COV.
-- Moody's Revises Key Collateral Assumptions
Moody's has maintained its recovery rate assumptions for both transactions,
which it updated on 18 December 2012 (see "Moody's updates
key collateral assumptions in Spanish ABS transactions backed by loans
to SMEs") and has revised its mean default assumptions in both transactions
because of worse-than-expected collateral performance since
the last review of the Spanish SME sector in Q4-2012.
For FTPYME TDA 7, FTA Moody's has increased its CoV from 41.6%
to 66.55%. Together with the increased assumptions
on mean default rate of 24% and the recovery rate of 50%,
this volatility increase corresponds to a portfolio credit enhancement
of 28.7%.
For GC FTGENCAT CAIXA TARRAGONA 1, FTA Moody's has increased
its CoV from 50% to 77.85%. Combined with
the increased assumptions on mean default probability of 24% and
the recovery rate of 60%, this volatility increase corresponds
to a portfolio credit enhancement of 24.6%.
-- Counterparty Exposure Has Decreased
The conclusion of Moody's rating review also takes into consideration
the limited exposure to commingling risk. Counterparties in both
transactions include Banco Guipuzcoano and Catalunya Banc SA (B1/NP),
respectively, which service the SMEs portfolios; and Barclays
Bank PLC (A2/P-1), which acts as the issuer account bank
in both transactions. The servicers transfers collections every
five business days and every two business days from the collection accounts
to the issuer account banks, respectively. The reserve fund
represents 4.9% and 7.8% of the current pool
balance in FTPYME TDA 7, FTA and GC FTGENCAT CAIXA TARRAGONA 1,
FTA, respectively.
As part of its analysis, Moody's also assessed the exposure to Credit
Agricole (A2/P-1) and CECABANK S.A. (Ba1 Watch DNG/NP)
as swap counterparties in FTPYME TDA 7, FTA and GC FTGENCAT CAIXA
TARRAGONA 1, FTA, respectively. The downgraded ratings
of the notes, which reflect the insufficiency of credit enhancement
to address sovereign risk, are consistent with this exposure.
-- 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 increased 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 the Request for Comment, "Approach to Assessing Linkage to Swap
Counterparties in Structured Finance Cashflow Transactions: Request
for Comment", 02 July 2012.
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 inverse normal distribution assumed for the portfolio
default rate. In each default scenario, Moody's calculates
the corresponding loss for each class of notes given the incoming cash
flows from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss for each tranche is the sum product
of the probability of occurrence of each default scenario and 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.
When remodeling the transactions affected by today's rating actions,
some inputs have been adjusted to reflect the new approach described above.
The methodologies used in these ratings were "Moody's Approach to Rating
EMEA SME Balance Sheet Securitisations", published in May 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.
The revised approach to incorporating country risk changes into structured
finance ratings forms part of the relevant asset class methodologies with
the publication of the Special Comment "Structured Finance Transactions:
Assessing the Impact of Sovereign Risk", published in March 2013.
LIST OF AFFECTED RATINGS
Issuer: FTPYME TDA 7, FTA
....EUR230.3M A1 Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR18.3M A2(CA) Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR20.2M B Notes, Downgraded
to Ba1 (sf); previously on Jul 2, 2012 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR11.2M C Notes, Downgraded
to Caa2 (sf); previously on Jul 2, 2012 Caa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: GC FTGENCAT Caixa Tarragona, FTA
....EUR104.3M AS Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR93.2M AG Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR25.7M B Notes, Downgraded
to Baa1 (sf); previously on Jul 2, 2012 A3 (sf) Placed Under
Review for Possible Downgrade
....EUR16.8M C Notes, Downgraded
to B3 (sf); previously on Jul 2, 2012 B2 (sf) Placed Under
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.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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.
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.
Ludovic Thebault
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
Monica Curti
Vice President - Senior Analyst
Structured Finance Group
Telephone:+39-02-9148-1100
Wei Jiao
Analyst
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 rating of four notes and confirms ratings of four notes in two Spanish SME ABS transactions
