EUR280 million of debt securities affected
Frankfurt am Main, February 22, 2013 -- Moody's Investors Service has today downgraded to Ba3(sf) and B2(sf),
respectively, the ratings on the Class A and B notes issued by FONDO
DE TITULIZACIÓN DE ACTIVOS SANTANDER PUBLICO 1. Today's
rating action reflects deterioration in the credit quality of the portfolio
backing the notes, which consists of Spanish public sector loans
, following the downgrade of the Government of Spain (Baa3/(P)P-3,
not on watch) on 13 June 2012. This rating action concludes the
review for downgrade initiated by Moody's on 2 July 2012.
Issuer: Fondo de Titulización de Activos Santander Público
1
....EUR1813M A Notes, Downgraded to
Ba3 (sf); previously on Jul 2, 2012 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR37M B Notes, Downgraded to B2
(sf); previously on Jul 2, 2012 Ba2 (sf) Placed Under Review
for Possible Downgrade
RATINGS RATIONALE
Today's rating action reflects the deteriorating credit quality
of the portfolio underpinning the Class A and B notes, as a result
of the Spanish sovereign downgrade in June 2012. This, in
turn, led to a worsening of the credit quality of several Spanish
sub-sovereign entities, such as universities and city councils,
which directly affected the credit quality of the Santander Publico 1
transaction. Low levels of credit enhancement within the transaction
could not offset this deterioration in portfolio credit quality and resulted
in a downgrade of the Class A and B notes to Ba3(sf) and B2(sf),
respectively.
-- PORTFOLIO CREDIT QUALITY
Moody's has assessed the current credit quality of the portfolio
as being equivalent to a Ba3 rating, which compares unfavourably
with the Baa3 average credit quality as per the rating agency's
last review on 11 April 2012. This average credit quality is derived
from recently updated credit estimates (for the top nine exposures accounting
for 38% of the portfolio) and Q scores for the remaining part of
the portfolio. In cases where neither credit estimates nor Q Scores
were available (13.4% of the pool), Moody's
assumed a proxy rating equivalent of Ba2 for universities, Ba3 for
county councils and B1 for city councils. The rating agency derived
these assumptions from the observations on the pool where Q scores or
credit estimates (CE) were available.
As credit estimates and Q scores do not carry credit indicators,
such as ratings reviews and outlooks, Moody's performed several
stress tests. In the rating agency's central scenario, it
downgraded by two notches the credit estimates of the six largest borrowers
with individual exposures in excess of 3% individually and 30%
collectively of the portfolio, which resulted in an average adjusted
credit quality of Ba3 assuming a 2.8 year weighted average life
(corresponding to a 9% default probability). Moreover,
the sub-sovereign profile of the bulk of the debtors, who
are all domiciled in Spain, leads to a 100% correlation assumption
in Moody's model. The rating agency assumed a 45% fixed
recovery rate on defaulted assets, in order to model the possible
restructuring of defaulted loans. Moody's also took into
consideration the fact that the borrower concentration in the portfolio
has increased significantly with an effective number of 44 loans now,
from 50 in April 2012. The top 16 exposures now account for 50%
of the volume of the pool. Among the largest six borrowers,
which collectively account for 30% of the volume of loans of the
pool, are (1) two universities, which represent 6.9%
and 3%, of the pool volume, respectively; (2)
a province and a region representing 5.6% and 5.3%,
respectively; and (3) two city councils, which represent 4.5%
and 4.4%, respectively.
In the application of the "Updated Approach to the Usage of Credit Estimates
in Rated Transactions" (October 2009), Moody's performed a number
of sensitivity analyses, including "jump-to-default"
tests. When downgrading either of the two senior exposures to Caa2,
the rating agency concluded that the model output for the senior tranche
would not be affected by more than one notch compared to the central scenario,
thus indicating the resiliency of its rating to standard stress.
-- STRUCTURE
This transaction is a static securitisation of a portfolio of loans to
Spanish public entities, which closed in December 2004. The
closing loan portfolio of EUR1,850 million has substantially amortised
to its current size of EUR280 million. The Class A and B notes
benefit from credit enhancement of approximately 8.7% and
4.3%, respectively, including a EUR12.1
million reserve fund. The reserve fund has amortised down to its
minimum level on the back of the transaction's good performance to date,
but suffered a draw on the January interest payment date (IPD).
-- PERFORMANCE
Although the performance of Santander Publico 1 has historically been
very good in terms of 90+ day delinquencies and defaults (delinquency
levels had never exceeded 0.3% prior to Q1 2011),
Moody's has noted a deterioration in the performance from Q1 2011
onwards. Indeed, 90+ day delinquencies reached 0.8%
of the outstanding pool balance as of Q1 2013.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was "Moody's Approach
to Rating Collateralized Loan Obligations", published in June
2011. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's used its excel-based cash flow model, Moody's ABSROM™,
as part of its quantitative analysis of the transaction. Moody's
ABSROM™ model enables users to model various features of a standard
European ABS transaction including: (1) the specifics of the default
distribution of the assets, their portfolio amortisation profile,
yield or recoveries; and (2) the specific priority of payments,
triggers, swaps and reserve funds on the liability side of the ABS
structure. Moody's ABSROM™ User Guide is available on Moody's
website and covers the model's functionality as well as providing a comprehensive
index of the user inputs and outputs. MOODY'S CDOROMv2.8™
was used to estimate the default distribution.
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.
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
Carole Gintz
VP - Senior Credit Officer
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 two classes of Santander Publico 1 ABS notes
