Frankfurt am Main, March 21, 2013 -- Moody's Investors Service has today downgraded the ratings of one mezzanine
note in one Spanish asset backed securities (ABS) transaction, AyT
Andalucia FTEmpresas Cajamar, FTA, and confirmed ratings of
three additional tranches of the same transaction. At the same
time, the ratings of the outstanding senior notes of Madrid FTPYME
I and Madrid FTPYME II are confirmed.
Today's rating action concludes the review of six ABS notes backed
by loan receivables granted to small and medium sized entities (SME),
which were placed on review on 02 July 2012, following the downgrade
of Spain's government bond ratings to Baa3 from A3 on 13 June 2012.
The rating actions are prompted by the reassessment of the available credit
enhancement to address sovereign risk. The determination of the
applicable credit enhancement that drives today's rating actions
reflects the introduction of additional risk 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).
The rating actions taken on AyT Andalucia FTEmpresas Cajamar, FTA
also reflect increased counterparty risks related to the issuer's
account bank. Moody's confirmed the ratings of securities
whose credit enhancement and structural features provided enough protection
against sovereign and (if applicable) counterparty risk.
Moody's downgraded the Class C notes in AyT Andalucia FTEmpresas Cajamar,
FTA by one notch to Baa2.
Please see the detailed list of all rating actions at the end of this
press release.
RATINGS RATIONALE
Today's rating action reflects primarily the impact of sovereign risk.
All Spanish ABS SME affected by today's rating action are impacted
by the introduction of new adjustments to Moody's modeling assumptions
accounting for the impact of the deterioration of the sovereign's credit
condition. In case of AyT Andalucia FTEmpresas Cajamar, FTA,
the rating actions also reflect the relatively high exposure of the rated
notes to the issuer account bank.
- 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, or "LCC") 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. See "Structured Finance Transactions: Assessing
the Impact of Sovereign Risk" for a more detailed explanation of the additional
parameters. This report is available on www.moodys.com
and can be accessed via the following link: http://www.moodys.com/research/Structured-Finance-Transactions-Assessing-the-Impact-of-Sovereign-Risk--PBS_SF319988.
The Spanish country ceiling, and therefore the maximum rating that
Moody's will assign to a domestic Spanish issuer including structured
finance transactions ("SF") 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 SME
transactions, the loss distribution volatility increases to capture
the 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 ("CE") for this rating uniquely
determine the volatility of the portfolio distribution, which is
typically measured as the coefficient of variation (COV) for ABS SME transactions.
All things equal, (i) a higher applicable CE for a given rating
ceiling or, alternatively, (ii) a lower rating ceiling with
the same applicable CE, translate into a higher COV according to
the updated methodology.
- REVISION OF KEY COLLATERAL ASSUMPTIONS
For all rating actions referenced herein, Moody's maintained
its default and recovery rate assumptions compared to its last review
in Q4 2012. However, Moody's increased its volatility
assumption in accordance with the updated methodology to account for sovereign
risk in SF transactions. Specifically, for Madrid FTPYME
I Moody's increased its volatility (CoV) assumption to 57.2%
(from 40%), which together with a mean DP of 14.6%
(as percentage of current balance) and a fixed recovery rate of 40%,
results into a portfolio credit enhancement of 20.5%.
For Madrid FTYPME II, Moody's increased its CoV assumption
to 66.1% (from 43%), which results into a portfolio
credit enhancement of 20% taking into account the mean DP of 10%
(as percentage of current balance) and a fixed recovery rate of 30%.
Finally, for AyT Andalucia FTEmpreasa Cajamar, FTA the CoV
was increased to 63% (from 50%), which together with
a mean DP of 18% (as percentage of current balance) and a fixed
recovery rate of 45%, results into a portfolio credit enhancement
of 24.5%.
-- EXPOSURE TO COUNTERPARTY RISK
The conclusion of Moody's rating review also takes into consideration
the exposure to weakened counterparties acting either as originator,
collection agent, issuer account bank or swap counterparty in the
transactions. The inability of key transaction parties to perform
their roles and difficulty in replacing them increases the risk of payment
disruption and performance deterioration in structured finance transactions.
Specifically, regarding the issuer account bank, Moody's has
assessed the probability and effect of a default of the issuer account
bank on the ability of the issuer to meet its obligations under the transactions,
including the impact of the loss of any benefit from the reserve fund
and accumulated collections. In conclusion, these factors
will not negatively affect the ratings of the notes issued by Madrid FTPYME
I and II, while the ratings on the notes related to AyT Andalucia
FTEmpresas Cajamar, FTA, were negatively impacted by the exposure
to the issuer's account bank, being Banesto (rated Baa3 /
P-3, under review for possible upgrade). For the latter
transaction, the considered exposure results from: (i) collections
currently transferred every day from the servicer's (Cajas Rurals
Unidas, not rated) collection account to the treasury account held
at the issuer account bank, where the amounts are accumulated until
next quarterly payment date and (ii) the reserve fund representing 16.6%
of current pool balance being also held by Banesto as issuer account bank.
Moody's approach for addressing the counterparty risk related to
the issuer account bank is described in the rating implementation guideline
"The Temporary Use of Cash in Structured Finance Transactions:
Eligible Investment and Bank Guidelines", published on 18
March 2013, which is available on www.moodys.com and
can be accessed via the following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF316982.
Today's rating actions take also into consideration the (i) current
swap counterparties (Banco Bilbao Vizcaya Argentaria S.A.
(Baa3 / P-3) in case of Madrid FTPYME I and II; CECABank S.A.
(Ba1, under review for possible downgrade / NP) in case of AyT Andalucia
FTEmpresas Cajamar, FTA) as well as (ii) the current swap triggers
as applicable to the respective transactions. Although, the
swaps related to Madrid FTPYME I and II remain in breach of the first
level swap triggers since change in swap trigger levels in December 2012,
and the swap for AyT Andalucia FTEmpresas Cajamar, FTA is in breach
of the second level swap trigger, these swap related elements do
not impact the current ratings. (Moody's published its Request
for Comments "Approach to Assessing Linkage to Swap Counterparties
in Structured Finance Cashflow Transactions" on 2 July 2012 on www.moodys.com,
which is accessible under the following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF289772
).
--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 level.
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.
The principal methodology used in these ratings was "Moody's Approach
to Rating CDOs of SMEs in Europe", published in February 2007.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The revised approach to incorporating country risk changes into structured
finance ratings forms part of the relevant asset class methodologies,
which Moody's supplemented on 11 March 2013 (more details available
on the following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319471),
along with the publication of its Special Comment "Structured Finance
Transactions: Assessing the Impact of Sovereign Risk", which
is available on www.moodys.com and can be accessed via the
following link: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988
.
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 normal inverse 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. In addition, for Madrid FTPYME II the input
of the interest deferral trigger of the Loan B has been corrected during
the review. Similarly, for AyT Andalucia FTEmpresas Cajamar,
FTA, the input for the default definition applicable on the portfolio
has been corrected during the review."
Issuer: AyT ANDALUC?A FTEMPRESA CAJAMAR, FTA
....EUR179M A(G) Notes, Confirmed at
A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and
Remained On Review for Possible Downgrade
....EUR27.5M B Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Remained On Review for Possible Downgrade
....EUR27.5M C Notes, Downgraded
to Baa2 (sf); previously on Jul 2, 2012 Baa1 (sf) Placed Under
Review for Possible Downgrade
....EUR21M D Notes, Confirmed at B2
(sf); previously on Jul 2, 2012 B2 (sf) Placed Under Review
for Possible Downgrade
Issuer: MADRID FTPYME I, FTA
....A2(G) Notes, Confirmed at A3 (sf);
previously on Jul 2, 2012 Downgraded to A3 (sf) and Remained On
Review for Possible Downgrade
Issuer: MADRID FTPYME II, FTA
....A2(G) Notes, Confirmed at A3 (sf);
previously on Jul 2, 2012 Downgraded to A3 (sf) and 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.
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.
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
Christophe?de Noaillat
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Silvia Baumann
AVP - 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 ratings on one mezzanine note in AyT Andalucia FTEmpresas Cajamar, FTA and confirms ratings on five notes in three Spanish ABS SME
