Frankfurt am Main, May 03, 2013 -- Moody's Investors Service has today downgraded the ratings of two notes
in one Spanish asset backed securities (ABS) transaction, UniCaja
AyT Empresas I, FTA, backed by loan receivables granted to
small and medium sized enterprises (SME) and originated by Unicaja Banco
(Ba1/NP). At the same time Moody's upgraded the mezzanine
note of PYME Valencia 1, FTA as well as the junior note in PYME
Valencia 2, FTA, backed by loan receivables granted to small
and medium sized enterprises (SME) and originated by Banco de Valencia
S.A. (Ba3/NP). Finally, Moody's confirmed
five additional tranches of these three ABS SME transactions. Insufficient
credit enhancement to address sovereign risk and, especially for
UniCaja AyT Empresas I, FTA, exposure to counterparty risk,
has prompted these actions.
Please see the detailed list of all rating actions towards the end of
the ratings rationale section of this press release.
RATINGS RATIONALE
Today's rating action reflects primarily the credit enhancement available
to address sovereign risk. All Spanish ABS SME affected by today's
rating action are 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. In case of UniCaja AyT Empresas
I, FTA, the rating action reflects in addition the relatively
high exposure of the rated notes (by way of credit enhancement provided
via the reserve fund) to the relatively lowly rated issuer account bank.
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).
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, 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
Moody's maintained its default and recovery rate assumptions for
the three transactions, which it updated on 18 December 2012 (see
"Moody's updates key collateral assumptions in Spanish ABS
transactions backed by loans to SMEs" http://www.moodys.com/research/Moodys-updates-key-collateral-assumptions-in-Spanish-ABS-transactions-backed--PR_262512).
Moody's increased its volatility assumption in accordance with the
updated methodology to account for sovereign risk in SF transactions.
For PYME Valencia 1, FTA, Moody's increased its volatility
(CoV) assumption to 59.4% (from 46.5%),
which together with a mean DP of 25% (as percentage of current
balance) and a fixed recovery rate of 45%, results into a
portfolio credit enhancement of 34.4%.
For PYME Valencia 2, FTA, Moody's increased its CoV
assumption to 49.8% (from 42%), which results
into a portfolio credit enhancement of 33.9% taking into
account the mean DP of 25% (as percentage of current balance) and
a fixed recovery rate of 40%.
For UniCaja AyT Empresas I, FTA the CoV was increased to 101.9%
(from 45.5%), which together with a mean DP of 12.3%
(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 servicer,
collection agent, issuer account bank or swap counterparty in the
transactions.
For PYME Valencia 1, FTA and PYME Valencia 2, FTA, today's
rating action incorporates the very limited exposure to commingling risk.
As servicer, Banco de Valencia (Ba3/NP) transfers the collections
from the portfolios daily from the collection account to the issuer account
bank, i.e. Barclays Bank plc (A2/P-1).
For UniCaja AyT Empresas I, FTA, today's rating action
incorporates the high exposure to commingling risk because of weakened
counterparty credit worthiness. Unicaja Banco (rated Ba1 / NP,
under review for possible downgrade) acts as servicer and issuer's
account bank. The high exposure results from: (i) collections
currently transferred every second day from the servicer's (Unicaja
Banco) collection account to the issuer's treasury account held
at the issuer account bank, where the amount is accumulated until
next quarterly payment date, and (ii) the reserve fund representing
20.6% of current pool balance being also held by Unicaja
Banco as issuer account bank.
As part of its analysis, Moody's also assessed the exposure
to (i) Banco Bilbao Vizcaya Argentaria S.A. (Baa3 / P-3)
acting as swap counterparty in PYME Valencia 1, FTA and (ii) to
Unicaja Banco (Ba1 / NP, under review for possible downgrade) acting
as swap counterparty in UniCaja AyT Empresas I, FTA, which
does not have a negative effect on the rating levels. There is
no swap in PYME Valencia 2, FTA.
--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.
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
remodelled and some inputs have been adjusted to reflect the new approach
described above.
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were "Moody's Approach to Rating
CDOs of SMEs in Europe", published in February 2007 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 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 updated and republished or supplemented on 11 March 2013
("Incorporating Sovereign risk to Moody's Approach to Rating CDOs of SMEs
in Europe"), along with the publication of its Special Comment "Structured
Finance Transactions: Assessing the Impact of Sovereign Risk".
Moody's describes additional factors that may affect the ratings in its
Request for Comment, "Approach to Assessing Linkage to Swap Counterparties
in Structured Finance Cashflow Transactions: Request for Comment",
02 July 2012.
Issuer: PYME VALENCIA 1, FTA
....EUR574.8M A2 Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR47.6M B Notes, Upgraded
to Baa3 (sf); previously on Jul 2, 2012 Ba3 (sf) Placed Under
Review for Possible Downgrade
....EUR34M C Notes, Confirmed at Caa3
(sf); previously on Jul 2, 2012 Caa3 (sf) Placed Under Review
for Possible Downgrade
Issuer: PYME VALENCIA 2, FONDO DE TITULIZACI?N DE ACTIVOS
....EUR407.5M A Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Remained On Review for Possible Downgrade
....EUR17.5M B Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR75M C Notes, Upgraded to A3 (sf);
previously on Jul 2, 2012 Baa3 (sf) Placed Under Review for Possible
Downgrade
Issuer: Unicaja AyT Empresas 1, Fondo de Titulizaci?n
de Activos
....EUR213.7M A Notes, Confirmed
at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf)
and Placed Under Review for Possible Downgrade
....EUR17.5M B Notes, Downgraded
to Baa3 (sf); previously on Jul 2, 2012 A3 (sf) Placed Under
Review for Possible Downgrade
....EUR18.8M C Notes, Downgraded
to Ba2 (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.
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
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 the two junior notes in Spanish Unicaja Banco ABS SME transaction, while upgrading two tranches in two Spanish Banco de Valencia ABS SME transactions and confirming in total five tranches in these three Spanish ABS SME
