Madrid, April 16, 2013 -- Moody's Investors Service has today downgraded the ratings of 12 junior
and 5 senior notes in five Spanish residential mortgage-backed
securities (RMBS) transactions: IM Cajamar 1, IM Cajamar 3,
IM Cajamar 4, IM Cajamar 5 and IM Cajamar 6.
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 3 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 7 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 IM Cajamar 3 and
IM Cajamar 5 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
Moody's has revised its lifetime loss expectation (EL) assumption in IM
Cajamar 3 and IM Cajamar 5 because of worse-than-expected
collateral performance since the last review of the Spanish RMBS sector
in November 2012. In IM Cajamar 3, loans more than 90 days
in arrears as of current portfolio balance increased to 1.23%
of current portfolio balance in December 2012 up from 0.79%
as of March 2012. In IM Cajamar 5, loans more than 90 days
in arrears increased to 1.94% of current portfolio balance
in December 2012 up from 1.03% a year earlier. Moody's
has increased the EL to 2.8% and 5.2%of original
pool balance in IM Cajamar 3 and IM Cajamar 5 respectively. Expected
loss assumptions remain unchanged at 1.04% for IM Cajamar
1, 2.31% for IM Cajamar 4 and 5.24%
for IM Cajamar 6.
In all five affected transactions, Moody's maintained the current
MILAN CE assumptions. The MILAN CE assumptions remain at 10.0%
for IM Cajamar 1, 12.5% for IM Cajamar 3, 12.5%
for IM Cajamar 4, 17.5% for IM Cajamar 5 and 20%
for IM Cajamar 6.
-- Exposure to Counterparty
Moody's rating analysis also took into consideration the exposure to the
treasury account held at Banco Popular Espa?ol (Ba1/NP on review
for downgrade) in IM Cajamar 1 and held at Banco Santander (Baa2/P2) in
IM Cajamar 3, IM Cajamar 4, IM Cajamar 5 and IM Cajamar 6,
as well as the exposure to the reinvestment account held at Bank of Spain
in all 5 transactions. The revised ratings in IM Cajamar 1,
IM Cajamar 3 and IM Cajamar 4 were negatively affected by the current
exposure to these counterparties.
The conclusion of Moody's rating review also takes into consideration
the exposure to Cajamar, now part of Cajas Rurales Unidas,
acting as swap counterparty for the IM Cajamar 5 and IM Cajamar 6 transactions
and to Banco Cooperativo (Ba1/NP) acting as swap counterparty in IM Cajamar
1. Moody's notes that, following the breach of the second
rating trigger, all three swaps do not reflect Moody's de-linkage
criteria. The rating agency has assessed the probability and effect
of a default of the swap counterparties on the ability of the issuer to
meet its obligations under the transactions. Additionally,
Moody's has examined the effect of the loss of any benefit from the swap
and any obligation the issuer may have to make a termination payment.
In conclusion, these factors will not negatively affect the rating
on the notes.
-- 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 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.
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: IM CAJAMAR 1 FONDO DE TITULIZACION DE ACTIVOS
....EUR353.3M A Notes, Downgraded
to Baa1 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Remained On Review for Possible Downgrade
....EUR9.3M B Notes, Downgraded
to Ba1 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR4.1M C Notes, Downgraded
to Ba3 (sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under
Review for Possible Downgrade
....EUR3.3M D Notes, Downgraded
to B2 (sf); previously on Jul 2, 2012 Ba2 (sf) Placed Under
Review for Possible Downgrade
Issuer: IM CAJAMAR 3 FONDO DE TITULIZACI?N DE ACTIVOS
....EUR1155M A Notes, Downgraded to
Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1 (sf)
and Remained On Review for Possible Downgrade
....EUR28.8M B Notes, Downgraded
to B1 (sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf)
and Remained On Review for Possible Downgrade
....EUR6M C Notes, Downgraded to B3
(sf); previously on Jun 8, 2012 Baa3 (sf) Placed Under Review
for Possible Downgrade
....EUR10.2M D Notes, Downgraded
to Caa1 (sf); previously on Jun 8, 2012 B3 (sf) Placed Under
Review for Possible Downgrade
Issuer: IM CAJAMAR 4 FONDO DE TITULIZACI?N DE ACTIVOS
....EUR961.5M A Notes, Downgraded
to Baa2 (sf); previously on Nov 23, 2012 Downgraded to Baa1
(sf) and Remained On Review for Possible Downgrade
....EUR25M B Notes, Downgraded to B1
(sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf) and
Remained On Review for Possible Downgrade
....EUR5M C Notes, Downgraded to B3
(sf); previously on Dec 16, 2011 Ba2 (sf) Placed Under Review
for Possible Downgrade
....EUR8.5M D Notes, Confirmed
at Caa1 (sf); previously on Dec 16, 2011 Caa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: IM Cajamar 5 Fondo de Titulizaci?n de Activos
....EUR962M A Notes, Downgraded to Ba1
(sf); previously on Nov 23, 2012 Downgraded to Baa2 (sf) and
Remained On Review for Possible Downgrade
....EUR11.5M B Notes, Downgraded
to B3 (sf); previously on Jun 8, 2012 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR12M C Notes, Downgraded to Caa3
(sf); previously on Jun 8, 2012 B2 (sf) Placed Under Review
for Possible Downgrade
Issuer: IM CAJAMAR 6 Fondo de Titulizaci?n de Activos
....EUR1836.2M A Notes, Downgraded
to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa2
(sf) and Remained On Review for Possible Downgrade
....EUR31.2M B Notes, Downgraded
to B2 (sf); previously on Jun 8, 2012 Baa2 (sf) Placed Under
Review for Possible Downgrade
....EUR19.5M C Notes, Downgraded
to Caa1 (sf); previously on Jun 8, 2012 Ba2 (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 this transaction
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.
Maria Turbica Manrique
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Michelangelo Margaria
VP - Senior Credit Officer/Manager
Structured Finance Group
Telephone:+39-02-9148-1100
Carole Bernard
VP - Senior 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
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades ratings on 17 notes in 5 Cajamar RMBS transactions
