EUR 4.50 billion of rated debt securities affected
Madrid, July 16, 2020 -- Moody's Investors Service ("Moody's") has assigned the following definitive
ratings to Notes issued by FONDO DE TITULIZACION RMBS SANTANDER 6:
....EUR 3,780M Serie A Notes due February
2063, Definitive Rating Assigned Aa3 (sf)
....EUR 720M Serie B Notes due February 2063,
Definitive Rating Assigned Caa1 (sf)
Moody's has not rated the EUR 225M Serie C Notes due February 2063.
RATINGS RATIONALE
The definitive ratings takes into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the Moody's Individual
Loan Analysis Credit Enhancement ("MILAN CE") assumption and the portfolio's
expected loss.
The key drivers for the portfolio's expected loss of 7.0%
are: (i) performance of the originators' preceding transactions;
(ii) benchmarking with comparable transactions in the Spanish RMBS market;
(iii) analysis of the static information on delinquencies and recoveries
received from Banco Santander S.A. (Spain) and Banco Popular
S.A. to rate precedent deals; and (iv) current economic
environment in Spain.
The key drivers for the 24.0% MILAN CE number, which
is above the average for Spanish RMBS, are: (i) the high LTV
nature of this pool with current weighted-average loan-to-value
("LTV") ratio of 82.5% calculated taking into account the
original full property valuations; (ii) 22% of the loans have
been previously in arrears (+30 days) at least once since the loans
were granted. However, for loans originated by Banco Popular
S.A. there is no payment history available before 1 January
2019; (iii) the fact that 9.6% of the borrowers in
the pool are not Spanish nationals; (iv) the high proportion 13.4%
of restructured loans in the portfolio; and (v) around 15.8%
of the loans are in payment holidays due to COVID-19 moratorium.
The rapid spread of the coronavirus outbreak, the government measures
put in place to contain it and the deteriorating global economic outlook,
have created a severe and extensive credit shock across sectors,
regions and markets. Our analysis has considered the effect on
the performance of residential mortgages from the collapse in Spanish
economic activity in the second quarter and a gradual recovery in the
second half of the year. However, that outcome depends on
whether governments can reopen their economies while also safeguarding
public health and avoiding a further surge in infections. As a
result, the degree of uncertainty around our forecasts is unusually
high. We regard the coronavirus outbreak as a social risk under
our ESG framework, given the substantial implications for public
health and safety.
Moody's considers that the deal has the following credit strengths:
(i) the full subordination of the Serie B, equivalent to 16.0%
of the original balance of the Notes; and (ii) a reserve fund,
which was funded at closing and is equal to 5.0% of the
original balance of the Notes; the reserve fund covers potential
shortfalls in the Notes' interest and principal during transaction's life.
The portfolio contains 95.69% floating-rate loans
linked to 12-month EURIBOR, 3.18% fixed rate
loans and 1.13% floating-rate loans linked to TRH
Total Entidades, whereas the Notes are linked to three-month
EURIBOR and reset quarterly. The transaction is not protected by
an interest rate swap. This risk has been taken into account when
assessing the subordination levels and only partial value was given to
the available spread. Moody's analysis takes into account
the potential interest rate exposure in order to assess the ratings.
Banco Santander S.A. (Spain) will continue servicing the
securitised loans. Even if there is no back-up servicer
in the transaction, the management company acts as back-up
servicer facilitator and independent cash manager.
The reserve fund provides liquidity support and is sufficient to cover
30 months of interest payments and senior expenses.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in May 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1228742.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less relevant
or typically remain unchanged during the surveillance stage. Please
see "Moody's Approach to Rating RMBS Using the MILAN Framework"
for further information on Moody's analysis at the initial rating
assignment and the on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that may lead to an upgrade of the ratings include a significantly
better-than-expected performance of the pool combined with
an increase of the Spanish Local Currency Country Risk Ceiling.
Factors that may cause a downgrade of the ratings include significantly
different loss assumptions compared with our expectations at closing due
to either: (i) a change in economic conditions from our central
forecast scenario; or (ii) idiosyncratic performance factors that
would lead to rating actions. Finally, a change in Spain's
sovereign risk may also result in subsequent rating actions on the Notes.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a model
that replicates the relevant structural features to derive payments and
therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios that
stress factors contributing to sensitivity of ratings and take into account
the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its assumptions
of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or Note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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 ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for
Designating and Assigning Unsolicited Credit Ratings available on its
website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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.
Alberto Barbachano
VP - Senior Credit Officer
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
Client Service: 44 20 7772 5454
Armin Krapf
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
