Paris, April 14, 2011 -- Moody's Investors Service has downgraded today to Baa1(sf) or lower the
senior ratings on one Greek CLO, eight Greek RMBS and ten Greek
ABS transactions. Moody's also downgraded the mezzanine and
junior ratings on one ABS transaction. Moody's maintained
on review for possible downgrade its ratings on three ABS transactions.
Moody's had previously place or maintained on review for downgrade
all of the affected ratings on 21 December 2010. A complete list
of all 22 downgrades by tranche is at the end of this press release.
Today's downgrades follows the downgrade of Greece's government
bond rating to B1 on 7 March 2011 ("Moody's downgrades Greece to B1 from
Ba1, negative outlook") and also considers the downgrade of several
Greek banks to a rating of Ba3 or lower on 9 March 2011 ("Moody's downgrades
the ratings of six Greek banks").
RATINGS RATIONALE
Maximum Baa1 (sf) Rating Achievable for Greek Structured Finance Transactions
Moody's commented on 11 March 2011 that Greek structured finance
transactions could no longer achieve or retain a rating of A3(sf) or higher
("Moody's gives an update on analysis of Greek structured finance
transactions"). Moody's explained that the downgrade
of the Greek government debt rating to B1 equated to an increased likelihood
for high severity events to occur. These events include 1) a severe
macro-economic decline affecting asset performance and 2) a deterioration
in a sovereign or local banks' creditworthiness, leading to operational
risk from the potential disruption of the performance of banks as key
transaction parties. Regardless of the structural features or the
amount of credit enhancement in place, structured finance transactions
are not immune to the risk of these high severity events.
Country Risks and Operational Risks in Greek Structured Finance Transactions
Today's rating actions reflect Moody's concerns about the exposure of
Greek structured finance transactions to country risks as well as operational
risks in extreme scenarios. Moody's recognizes, however,
that transactions with high credit enhancement are more able to sustain
significant asset performance deterioration resulting from country risks
and operational risks. Moody's rating actions address the operational
risks associated with the banks acting as transaction parties performing
functions such as servicing, cash management and hedging.
The level of rating migration in the senior rating of Greek ABS,
CLO and RMBS vary depending on the credit quality of the assets,
the credit enhancement, the credit quality of the key counterparties
and the existence of structural mitigants for operational risks.
In particular, Moody's downgraded to Baa2(sf) or lower the
ratings of senior tranches that had credit enhancement under the minimum
levels necessary to achieve or retain the highest possible ratings for
each asset class. These levels, which correspond to potential
losses associated with high severity events, are 50% for
CLOs, 45% for ABS SME and Leases, 40% for consumer
ABS, and 25% for RMBS.
Moody's downgraded to Baa3(sf) or lower the ratings of senior notes
on transactions that lacked strong operational risk mitigants.
Mitigants include back-up servicing arrangements, independent
cash managers and arrangements by which the trustee or cash manager can
draw liquidity and independently compute the amounts due under the notes
or other senior payments in the event the servicer does not produced its
reports on time. Moody's downgraded to Baa2(sf) or lower
the ratings of senior notes on transactions with strong operational risk
mitigants but with exposure to servicers rated below Baa3.
Transactions with High Linkage to Originating Bank
In addition, Moody's downgraded to Ba1(sf) or lower,
depending on their credit enhancement, the ratings of the notes
on transactions backed by a significant proportion of revolving loans
with short-term bullet maturities (Allilohreos) from banks rated
below Baa3. There is a risk that the banks will not be able to
refinance these loans.
Finally, Moody's has maintained on review for possible downgrade
the Baa2(sf) ratings of three transactions originated by Piraeus Bank
S.A. (Ba3, Non-Prime). The review follows
the announcement by the originator that it intends to transfer the issuer
accounts from Citibank N.A. (A1/Prime-1) to itself.
The issuer had previously transferred the issuer accounts to Citibank
as part of recent amendments on these transactions. The transfer
back to the originator would create a high linkage between its credit
quality and that of the transactions and would likely result in further
downgrades on the ratings of the three affected transactions.
Moody's Revised Default Assumptions for Greek Consumer ABS
Moody's increased its lifetime mean default to 20% from 11%
for the transaction DANEION 2007-1 PLC, to 20% from
7.5% for the transaction KATANALOTIKA PLC, and to
15% from 7.5% for the transaction PRAXIS I FINANCE
PLC. Moody's also revised to 35% the coefficient of
variation it assumes for the default distribution on DANEION 2007-1
PLC (up from 30%) and on KATANALOTIKA PLC (down from 45%)
as both transactions show similar performance patterns. The revised
assumptions reflect both the performance of these transactions and the
expectations of further deterioration in the future.
Rating methodologies
The determination of the highest achievable ratings and minimum credit
enhancement requirements described above complement the applicable principal
methodologies for each asset class. To identify the primary methodology
for each of the asset classes of the affected transactions, please
refer to the index of methodologies under the research and ratings tab
on Moodys.com.
Moody's Investors Service did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
related to the monitoring of these transactions in the past six months.
LIST OF AFFECTED SECURITIES BY ASSET CLASS
ABS
Issuer: ANAPTYXI 2006-1 PLC
A Certificate, Downgraded to Ba1 (sf); previously on Dec 21,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
B Certificate, Downgraded to Ba2 (sf); previously on Dec 21,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
C Certificate, Downgraded to Ba3 (sf); previously on Dec 21,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
D Certificate, Downgraded to B2 (sf); previously on Dec 21,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Axia Finance PLC
A Certificate, Downgraded to Baa2 (sf) and Remains On Review for
Possible Downgrade; previously on Jul 15, 2010 Downgraded to
A3 (sf) and Remained On Review for Possible Downgrade
Issuer: Axia III Finance Plc
A Certificate, Downgraded to Ba1 (sf); previously on Jul 15,
2010 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade
Issuer: DANEION 2007-1 PLC
Class A Certificate, Downgraded to Baa2 (sf); previously on
Jul 15, 2010 Downgraded to A2 (sf) and Remained On Review for Possible
Downgrade
Issuer: IRIDA PLC
A Certificate, Downgraded to Baa2 (sf); previously on Dec 21,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Issuer: KATANALOTIKA PLC
A Certificate, Downgraded to Baa2 (sf); previously on Jul 15,
2010 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade
Issuer: Misthosis Funding Plc
A Certificate, Downgraded to Baa1 (sf); previously on Dec 21,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Issuer: PRAXIS I FINANCE PLC
A Certificate, Downgraded to Baa2 (sf) and Remains On Review for
Possible Downgrade; previously on May 12, 2010 Downgraded to
A3 (sf) and Remained On Review for Possible Downgrade
Issuer: Praxis II Finance Plc
A Certificate, Downgraded to Baa2 (sf) and Remains On Review for
Possible Downgrade; previously on May 12, 2010 Downgraded to
A2 (sf) and Remained On Review for Possible Downgrade
Issuer: Synergatis Plc
A Certificate, Downgraded to Baa1 (sf); previously on Dec 21,
2010 A3 (sf) Placed Under Review for Possible Downgrade
RMBS
Issuer: Estia Mortgage Finance II PLC
A Notes, Downgraded to Baa3 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Grifonas Finance No. 1 Plc
A Certificate, Downgraded to Ba1 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: KION Mortgage Finance No. 2 Plc
A Certificate, Downgraded to Baa3 (sf); previously on May 12,
2010 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade
Issuer: KION Mortgage Finance Plc
A Certificate, Downgraded to Baa3 (sf); previously on Jul 15,
2010 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade
Issuer: Themeleion II Mortgage Finance Plc
A Certificate, Downgraded to Baa3 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Themeleion III Mortgage Finance Plc S.r.I.
A Certificate, Downgraded to Baa3 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Themeleion IV Mortgage Finance Plc
A Certificate, Downgraded to Baa3 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Themeleion Mortgage Finance PLC
A Notes, Downgraded to Baa3 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
CLO
Issuer: EPIHIRO PLC
Class A Asset Backed Floating Rate Notes due January 2035 Notes,
Downgraded to Baa2 (sf); previously on Jul 15, 2010 Downgraded
to A2 (sf) and Remained On Review for Possible Downgrade
REGULATORY DISCLOSURES
Ratings have been disclosed to the rated entities or their designated
agents and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit ratings are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuers or obligations satisfactory for the purpose of maintaining
credit ratings. The lead analyst and rating office for each of
the transactions affected are generally different from the contact and
office listed at the end of this press release.
For each transaction, the lead analyst name is available on the
issuer page, and the rating office is available on the ratings tab
of the issuer on www.moodys.com.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Frankfurt am Main
Sebastian Hoepfner
Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Ariel Weil
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades senior ratings of Greek structured finance transactions