London, 02 April 2013 -- Moody's Investors Service has today downgraded the ratings of six junior
and five senior notes in four Spanish residential mortgage-backed
securities (RMBS) transactions: AyT Hipotecario III, FTH,
Bancaja 10, FTA, Bancaja 11, FTA and Bancaja 13,
FTA. Insufficiency of credit enhancement to address sovereign risk
and deterioration in collateral performance have prompted today's action.
Today's rating action concludes the review of four notes placed
on review on 2 July 2012, following Moody's downgrade of Spanish
government bond ratings to Baa3 from A3 on June 2012. This rating
action also concludes the review of seven 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 rating action reflects primarily the insufficiency of credit enhancement
to address sovereign risk. The rating action on Bancaja 13,
FTA also reflects the recent deterioration in collateral performance.
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
During its review Moody's increased its expected loss (EL) assumption
in Bancaja 13, FTA to 5.50% from 2.50%
and its MILAN CE assumption to 20.0% from 12.67%
due to worse-than-expected collateral performance.
The deterioration in performance is reflected by the rise of loans more
than 90 days in arrears as of current portfolio balance to 5.42%
as of October 2012 from 2.12% as of January 2012.
In the same period cumulative defaults (defined as loans more than 18
months in arrears) surged to 1.20% from 0.79%
of original portfolio balance. As a consequence the reserve fund
has been used in the last payment date in October 2012 and currently stands
at 99% of its target amount.
Moody's has not revised the key collateral assumptions for AyT Hipotecario
III, FTH, Bancaja 10, FTA and Bancaja 11, FTA
and has maintained the lifetime expected loss (EL) and MILAN CE assumptions
revised in November 2012:
AyT Hipotecario III, FTH: EL 0.45% and MILAN
CE 10.0%:
Bancaja 10, FTA: EL 6.60% and MILAN CE 20.0%
Bancaja 11, FTA: EL 7.43% and MILAN CE 20.0%
-- Pro-rata versus sequential amortisation of class
A notes
Today's rating action takes into account the sequential to pro-rata
amortisation trigger of the class A2 and A3 notes in both, Bancaja
10, FTA and Bancaja 11, FTA. The performance triggers
in the two transactions will switch the amortisation and loss allocation
within the class A2 and A3 notes from currently sequential to pro-rata
once the sum of the outstanding class A2 and A3 notes should be less than
the performing portfolio balance (including loans up to 90+ in arrears).
Moody's believes that this event is very likely to happen in its
expected scenario and the impact is incorporated in the revised ratings
of the two transactions.
-- Exposure to Counterparty
Moody's rating analysis also took into consideration the exposure
of the senior notes in Bancaja 13, FTA to Banco Santander (Baa2/P-2)
acting as issuer account bank. The revised ratings were not negatively
affected by the current counterparty 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 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.
Additional factors that may affect the ratings are described 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.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Moody's Approach to
Rating RMBS Using the MILAN Framework published in March 2013.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology
Other factors used in these ratings are described in the Rating Implementation
Guidance "The Temporary Use of Cash in Structured Finance Transactions:
Eligible Investment and Bank Guidelines", published in March 2013.
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.
LIST OF AFFECTED RATINGS
Issuer: AyT HIPOTECARIO III
....EUR13.2M B Notes, Downgraded
to Ba1 (sf); previously on Nov 23, 2012 Downgraded to Baa2
(sf) and Remained On Review for Possible Downgrade
Issuer: BANCAJA 10 Fondo de Titulizacion de Activos
....EUR1537M A2 Notes, Downgraded to
Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf)
and Remained On Review for Possible Downgrade
....EUR500M A3 Notes, Downgraded to
Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf)
and Remained On Review for Possible Downgrade
....EUR65M B Notes, Downgraded to Caa1
(sf); previously on Nov 23, 2012 Downgraded to Ba3 (sf) and
Remained On Review for Possible Downgrade
....EUR52M C Notes, Downgraded to Ca
(sf); previously on Jul 2, 2012 Caa3 (sf) Placed Under Review
for Possible Downgrade
Issuer: Bancaja 11, Fondo de Titulizacion de Activos
....EUR1193M A2 Notes, Downgraded to
Ba2 (sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf)
and Remained On Review for Possible Downgrade
....EUR440M A3 Notes, Downgraded to
Ba2 (sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf)
and Remained On Review for Possible Downgrade
....EUR63M B Notes, Downgraded to Ca
(sf); previously on Jul 2, 2012 Caa1 (sf) Placed Under Review
for Possible Downgrade
Issuer: BANCAJA 13 FONDO DE TITULIZACION DE ACTIVOS
....EUR2583.7M A Notes, Downgraded
to Baa1 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR152M B Notes, Downgraded to Ba2
(sf); previously on Nov 23, 2012 Downgraded to Baa1 (sf) and
Remained On Review for Possible Downgrade
....EUR159.3M C Notes, Downgraded
to B3 (sf); previously on Jul 2, 2012 Baa3 (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.
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 ratings on 11 Spanish RMBS tranches
