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Rating Action:

Moody's rates Fideicomiso Financiero CCF Créditos Serie 3, a personal loan securitization in Argentina

Global Credit Research - 28 Aug 2013

Buenos Aires City, August 28, 2013 -- Moody's Latin America (Moody's) has assigned ratings to the debt securities and certificates of Fideicomiso Financiero CCF Créditos Serie 3. This transaction will be issued by Equity Trust Company (Argentina) S.A. - acting solely in its capacity as issuer and trustee.

Moody's notes that as of today, the securities contemplated by this transaction have not yet settled. If any assumptions or factors considered by Moody's in assigning the ratings change before closing, Moody's could change the ratings assigned to the notes.

- ARS 197,315,200 in Class A Floating Rate Debt Securities (VDF TVA) of "Fideicomiso Financiero CCF Créditos Serie 3", rated Aaa.ar (sf) (Argentine National Scale) and Ba3 (sf) (Global Scale, Local Currency)

- ARS 24,664,400 in Class B Fixed Rate Debt Securities (VDF TFB) of "Fideicomiso Financiero CCF Créditos Serie 3", rated A2.ar (sf) (Argentine National Scale) and B2 (sf) (Global Scale, Local Currency)

- ARS 24,664,400 in Certificates (CP) of "Fideicomiso Financiero CCF Créditos Serie 3", rated B2.ar (sf) (Argentine National Scale) and Caa2 (sf) (Global Scale, Local Currency)

The rating of the VDF TVA and VDF TFB securities addresses the expected loss posed to investors related to the payment of interest and principal by the legal final maturity date (July 12, 2016). The rating of the CP addresses the expected loss posed to investors related to the repayment of the principal only by the legal final maturity date. The rating of the CP does not address any other interest or residual payments.

RATINGS RATIONALE

The ratings are mainly based on the following factors:

-- Initial subordination of the VDF TVA securities of 3,57% (calculated over principal from the loans). If calculated taking into account any interest accrued and paid as of the cut off date, the intial subordination would be 16.09%

-- The turbo sequential payment structure which captures all the available excess spread in the transaction to pay down the VDF securities (approximately 57,65% annually, assuming 0% defaults and 0% prepayments, before expenses and taxes)

-- The ability of Cordial Compañía Financiera S.A. (CCF) (B2/Aa3.ar) to act as primary servicer of the pool

-- The ability of Banco Supervielle S.A. (B2/Aa3.ar) to act as master servicer and backup servicer

-- The credit quality of the underlying loans

-- The availability of several reserve funds

The rated securities are payable from the cash flow coming from the assets of the trust, which is an amortizing pool of 40,663 eligible personal loans denominated in Argentine pesos, with a fixed interest rate, originated by Cordial Compañía Financiera S.A. (CCF), in an aggregate amount of ARS 204,619,746.66.

Moody's considered the credit enhancement provided in this transaction through the initial subordination levels for each rated class, as well as the historical performance of CCF's portfolio. In addition, Moody's considered factors common to consumer loans securitizations such as delinquencies, prepayments and losses; as well as specific factors related to the Argentine market, such as the probability of an increase in losses if there are changes in the macroeconomic scenario in Argentina.

These factors were incorporated in a cash flow model that takes into account all the relevant features of the transaction's assets and liabilities. Monte Carlo simulations were run, which determines the expected loss for the rated securities.

In assigning the rating to this transaction, Moody's assumed a lognormal distribution for defaults as follows: a mean of 14% and a coefficient of variation of 60%. Moody's also assumed a lognormal distribution for prepayments with a mean of 40% and a coefficient of variation of 50%. These assumptions are derived from the historical performance to date of the CCF pools. Servicer default was modeled by simulating the default of CCF as the servicer consistent with its current ratings. In the scenarios where the servicer defaults, Moody's assumed that the defaults on the pool would increase by 20 percentage points compared with the base default assumption.

The model results showed 0.11% expected loss for the VDF TVA securities, 3.88% for the VDF TFB and 16.50% for the CP certificate.

Moody's ran several stress scenarios, including increases in the default rate assumptions. If default rates were increased 3% from the base case scenario, the ratings of the VDF TFB and the CP would be downgraded to Caa1 (sf) and Caa3 (sf) respectively. The rating of the VDF TVA securities would remain unchanged.

Finally, Moody's also evaluated the back-up servicing arrangements in the transaction. The transaction is linked to the credit quality of the servicer, which will transfer collections to the trust account every 72 hours. Therefore, there are three days of commingling risk at the servicer level. If CCF is removed as servicer, Banco Supervielle S.A. will be appointed as the backup servicer. However, Banco Supervielle belongs to the same economic group than the primary servicer. This is mitigated by the fact that collections are initially received by two collection agents before flowing into CCF's account. Borrowers should be able to continue making payments at any of these two collection agents if the servicer needs to be replaced. As a result, any potential servicer replacement should be simpler in this case than in other Argentine transactions.

CCF, the originator and primary servicer in the transaction, is a financial company owned by Banco Supervielle (B2/Aa3.ar) which holds 95% of CCF's shares. CCF offers financial products such as credit cards, personal and consumer loans to Wal-Mart customers in Argentina, based on a commercial agreement with Wal-Mart Argentina S.R.L. signed in July 2010. CCF current deposit ratings are Aa3.ar (national scale rating) and B2 (global scale, local currency).

The main source of uncertainty for this transaction is the level of delinquency of the loans assigned to the trust. A worsening in macroeconomic conditions such as an increase in unemployment could increase the losses of the pool. Obligors in this transaction belong to low or middle income socioeconomic segments, therefore they may be more affected by a slowdown in the economic activity or higher unemployment. However, Moody's believes CCF's has in place solid collection and loss mitigation practices that should mitigate this risk to some extent.

The principal methodology used in this rating was Moody's Approach to Rating Consumer Loan ABS Transactions published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Credit Ratings to Global Scale Credit Ratings".

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 in this transaction.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF327647

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Martin Fernandez Romero
Vice President - Senior Analyst
Structured Finance Group
Moody's Latin America
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Maria Muller
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Latin America
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Moody's rates Fideicomiso Financiero CCF Créditos Serie 3, a personal loan securitization in Argentina
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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