Madrid, June 25, 2014 -- Moody's Investors Service has today placed on review for downgrade the
mortgage and public sector covered bonds issued by Catalunya Banc SA (Catalunya
Banc; deposits B3 on review for downgrade, bank financial strength
rating (BFSR) E /baseline credit assessment (BCA) caa2), following
the rating agency's decision to place the issuer's respective bank ratings
on review for downgrade.
RATINGS RATIONALE
Today's rating action is prompted by Moody's decision to place Catalunya
Banc's B3 long-term debt and deposit ratings on review for
downgrade, which has been triggered by the weak performance of the
institution, chiefly in terms of asset quality and profitability.
For further information on the rating actions taken by Moody's Financial
Institutions Group, please refer to "Moody's places Catalunya Banc's
B3 ratings on review for downgrade" (https://www.moodys.com/research/Moodys-places-Catalunya-Bancs-B3-ratings-on-review-for-downgrade--PR_301976)
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process;
an expected loss analysis and a TPI (timely payment indicator) framework
analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL)
to determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the probability that the
issuer will cease making payments under the covered bonds (a CB anchor
event); and (2) the stressed losses on the cover pool assets following
a CB anchor event.
For the two covered bond programmes listed below, the cover pool
losses are an estimate of the losses Moody's currently models if a CB
anchor event occurs. Moody's splits cover pool losses between market
risks and collateral risks. Market risks measure losses stemming
from refinancing risks and risks related to interest rate and currency
mismatches (these losses may also include certain legal risks).
Collateral risks measure losses resulting directly from cover pool assets'
credit quality. Moody's derives the collateral risk from the collateral
score.
The CB anchor for these programmes is the senior unsecured/deposit rating
(SUR) plus 0 notches given that the debt ratio is below 5%.
(1) CATALUNYA BANC'S MORTGAGE COVERED BONDS
The cover pool losses for this programme stand at 34.3%,
with market risk of 16.8% and collateral risk of 17.5%.
The collateral score is 26.1%. The over-collateralisation
(OC) in the cover pool is 153.3%, of which 25%
is on a committed basis. The minimum OC level that is consistent
with the Ba1 rating target is 16%. These numbers demonstrate
that Moody's is not relying on uncommitted OC in its expected loss analysis.
(2) CATALUNYA BANC'S PUBLIC SECTOR COVERED BONDS
The cover pool losses for this programme stand at 33.2%,
with market risk of 12% and collateral risk of 21.2%.
The collateral score is 42.4%. The over-collateralisation
(OC) in the cover pool is 492.5%, of which 42.9%
is on a committed basis. The minimum OC level that is consistent
with the Ba1 rating target is 15.5%. These numbers
demonstrate that Moody's is not relying on uncommitted OC in its expected
loss analysis.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Moody's Global Covered Bonds
Monitoring Overview", published quarterly. All numbers in
this section are based on the most recent Performance Overview (based
on data, as of Q1 2014).
TPI FRAMEWORK: Moody's assigns a TPI, which indicates the
likelihood that the issuer will make timely payments to covered bondholders
in the event of an issuer default. The TPI framework limits the
covered bond rating to a certain number of notches above the CB anchor.
For these programmes, Moody's has assigned a TPI of "Probable".
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The CB anchor is the main determinant of a covered bond programme's rating
robustness. A change in the level of the CB anchor could lead to
an upgrade or downgrade of the covered bonds. The TPI Leeway measures
the number of notches by which Moody's might lower the CB anchor before
the rating agency downgrades the covered bonds because of TPI framework
constraints.
The TPI assigned for both Catalunya Banc's programmes is Probable.
The TPI Leeway for these programmes is limited, and thus any reduction
of the CB anchor may lead to a downgrade of the covered bonds.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (2) a multiple-notch downgrade of the issuer; or
(3) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating Covered Bonds", published in March 2014. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
Moody's did not use any stress scenario simulations in its analysis.
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.
Tomas Rodriguez-Vigil
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 Catalunya Banc's mortgage and public sector covered bonds for Downgrade.
