Madrid, February 08, 2012 -- Moody's Investors Service has placed on review for downgrade the Baa1
long-term ratings assigned to the mortgage covered bonds and the
Baa2 long-term ratings assigned to public-sector covered
bonds, both issued by Catalunya Banc (rated Ba1, on review
for downgrade/ Not-Prime; E+, developing outlook).
The ratings remain on review for downgrade.
Today's rating actions were prompted by the review for downgrade
of Catalunya Banc Ba1 senior unsecured long-term ratings.
RATINGS RATIONALE
Today's rating action follows the review for downgrade of Catalunya
Banc's Ba1 senior unsecured long-term ratings. For
further information on the rating actions taken by Moody's Financial Institutions
Group, please refer to "Moody's reviews for downgrade Catalunya
Banc's Ba1 debt ratings; standalone ratings downgraded to E+/B1"
published on 7 February 2012.
Any downgrade of the issuer ratings would negatively affect the covered
bonds through their impact on both the expected loss method and the timely
payment indicator (TPI) framework.
EXPECTED LOSS
As the issuer's credit strength is incorporated into Moody's expected
loss assessment, any downgrade of the issuer's rating will increase
the expected loss on the covered bonds. However, Moody's
notes that the issuer may be able to offset any deterioration in the expected
loss analysis if sufficient collateral is held in the cover pool.
The over-collateralisation required to support the current Baa1
rating for Catalunya Banc's mortgage covered bonds is 23%.
The covered bonds currently benefit from 136.9% over-collateralisation
(based on data as of the end September 2011), of which 25%
is in committed form.
The over-collateralisation required to support the current Baa2
rating for Catalunya Banc's public-sector covered bonds is
0%.The covered bonds currently benefit from 154.4%
over-collateralisation (based on data as of the end September 2011),
of which 42.9% is in committed form.
TPI FRAMEWORK
The current TPI for Catalunya Banc's mortgage covered bonds is "Probable".
Given this TPI and Catalunya Banc's Ba1 senior unsecured long-term
rating, the ratings assigned to the covered bonds are capped at
Baa1.
The current TPI for Catalunya Banc's public-sector covered
bonds is "Improbable". Given this TPI and Catalunya Banc's
Ba1 senior unsecured long-term rating, the ratings assigned
to the covered bonds are capped at Baa2.
The current ratings assigned to the existing covered bonds can be expected
to be assigned to all subsequent covered bonds issued under the relevant
programme and any future rating actions are expected to affect all covered
bonds issued under the 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:
an expected loss analysis and a 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 (i) a function
of the issuer's probability of default (measured by the issuer's
rating); and (ii) the stressed losses on the cover pool assets following
issuer default.
The cover pool losses for Catalunya Banc mortgage covered bonds are 45.6%.
This is based on Moody's most recent modelling (based on data,
as of the end September 2011) and is an estimate of the losses Moody's
currently models if issuer defaults. Cover pool losses can be split
between market risk of 19.4% and collateral risk of 26.2%.
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) and further stresses that Moody's
may add to its analysis when the rating of the covered bond exceeds the
sovereign debt rating. 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, which for
this programme is currently 39.1%.
The cover pool losses of Catalunya Banc public-sector covered bonds
are 29.9%, with market risk of 19.7%
and collateral risk of 10.2%. The collateral score
for this programme is currently 20.5 %.
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 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 typically 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.
For Catalunya Banc's mortgage covered bonds, Moody's has assigned
a TPI of Probable and for Catalunya Banc's public-sector
covered bonds, Moody's has assigned a TPI of Improbable
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.
Based on the current TPI of Probable, the TPI Leeway for Catalunya
Banc's mortgage covered bonds is limited, and thus any downgrade
of the issuer ratings may lead to a downgrade of the covered bonds.
Based on the current TPI of Improbable, the TPI Leeway for Catalunya
Banc's public-sector covered bonds 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.
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 for downgrade Catalunya Banc's mortgage and public-sector covered bonds
