Madrid, December 13, 2011 -- Moody's Investors Service has today placed on review for upgrade Banco
CAM's Baa1 mortgage covered bonds and Baa2 public-sector
covered bonds. Previously, both covered bonds were on review
with direction uncertain. The ratings remain unchanged.
RATINGS RATIONALE
Today's rating announcement was prompted by Moody's decision
to place Banco CAM's Ba1 senior unsecured rating on review for upgrade,
following its acquisition by Banco Sabadell announced on 7 December 2011.
Banco Sabadell's mortgage covered bonds are on review for downgrade.
This follows the review for downgrade of Banco Sabadell's issuer
ratings due to, amongst others, Moody's reassessment
of the financial strength of all Spanish banks and the effect of the integration
with Banco CAM on the bank's credit profile.
For further details please refer to "Moody's reviews Spanish banks'
ratings for downgrade; removes systemic support for subordinated
debt", published on 12/12/2011.
The review for upgrade of Banco CAM's issuer ratings affects the
covered bonds through its impact on both the expected loss analysis and
timely payment analysis.
EXPECTED LOSS METHOD
Under Moody's rating methodology, an issuer's credit strength is
incorporated into Moody's expected loss analysis. Therefore,
any change in the issuer's ratings changes the expected loss on the covered
bonds.
TPI FRAMEWORK
Moody's assigns a "timely payment indicator" (TPI), which indicates
the likelihood that timely payment will be made to covered bondholders
following issuer default. The TPI assigned to Banco CAM's
mortgage covered bonds is Probable, whilst the TPI assigned to its
public-sector covered bonds is Improbable.
The current ratings assigned to the existing covered bonds of the above
programmes can be expected to be assigned to all subsequent covered bonds
issued under the relevant programme. Any future rating actions
are expected to affect all covered bonds issued under the relevant programme.
If there are any exceptions to this, Moody's will in each case publish
details in a separate press release.
The ratings assigned by Moody's address the expected loss posed to investors.
Moody's ratings address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered
Bond Model (COBOL), which determines expected loss as a function
of the issuer's probability of default. This is measured
by the issuer's rating and the stressed losses on the cover pool
assets following issuer default.
The cover pool losses are based on Moody's most recent modelling
and are an estimate of the losses Moody's currently models if the relevant
issuer defaults. Cover pool losses can be split between Market
Risk and Collateral Risk. Market Risk measures losses as a result
of refinancing risk and risks related to interest-rate and currency
mismatches (these losses may also include certain legal risks).
Collateral Risk measures losses resulting directly from the credit quality
of the assets in the cover pool. Collateral Risk is derived from
the Collateral Score.
The cover pool losses for Banco CAM's mortgage covered bond programme
are 41.5%, with market risk of 19.1%
and collateral risk of 22.3%. The collateral score
for this programme is currently 33.3%.
The cover pool losses for Banco CAM's public-sector covered
bond programme are 25.8%, with market risk of 14.9%
and collateral risk of 10.9%. The collateral score
for this programme is currently 21.9%.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the latest data that has been analysed by Moody's and
are subject to change over time. These numbers are updated quarterly
in the "Performance Overview" published by Moody's.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The TPI Leeway measures the number of notches by which the issuer's rating
may be downgraded before the covered bonds are downgraded under the TPI
framework. The TPI Leeway for both programmes is limited,
and thus any downgrade of the issuer ratings may lead to a downgrade of
the covered bonds.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances. Some examples might be (i) a sovereign
downgrade negatively affecting both the issuer's senior unsecured rating
and the TPI; (ii) a multiple-notch downgrade of the issuer;
or (iii) a material reduction of the value of the cover pool.
As noted in Moody's comment 'Rising Severity of Euro Area Sovereign Crisis
Threatens Credit Standing of All EU Sovereigns' (28 November 2011),
the risk of sovereign defaults or the exit of countries from the Euro
area is rising. As a result, Moody's could lower the maximum
achievable rating for covered bonds transactions in some countries,
which could result in rating downgrades.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's
Approach to Rating Covered Bonds" published in March 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
this review.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 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.
Tomas Rodriguez-Vigil
Associate Analyst
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
SUBSCRIBERS: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews Banco CAM's covered bonds for upgrade
