Madrid, December 23, 2010 -- Moody's Investors Service has today placed on review for possible downgrade
the ratings of notes of 25 Portuguese structured finance transactions.
Ratings under review include the Aaa (sf) ratings on two RMBS, the
ratings of most of the mezzanine and junior notes in 21 other RMBS transactions,
and the ratings of six notes in four ABS transactions. Moody's
provides the detailed list of today's rating actions at the end
of this press release.
Today's rating actions reflect Moody's expectation of further
asset performance deterioration, because of the uncertainties around
Portugal's longer-term economic vitality. On 21 December
2010, Moody's placed on review for possible downgrade Portugal's
A1 rating, citing Portugal's sluggish growth, downward
pressure on GDP growth, heightened funding costs and the financial
impact of support to the banking sector.
The vulnerability of the Portuguese financial sector to continued loss
of funding and higher impairments is another important factor in today's
rating actions for transactions that lacked strong features to mitigate
operational risk. On 21 December 2010, Moody's widened
the review of Portuguese bank ratings announced on 9 December, which
now extends to all rated Portuguese banks.
On 22 June 2010, Moody's placed on review for possible downgrade
Aaa (sf) and Aa (sf) ratings in 23 Portuguese RMBS and three Portuguese
ABS, having placed Portugal's rating on review for possible
downgrade in May. At that time, the review of the RMBS and
ABS focused on the resilience of these notes to extreme loss scenarios
in the context of a sovereign and banking crisis. The notes in
these 26 transactions, as well as in the additional 2 RMBS and 2
ABS transactions only affected by today's action, will remain
on review for possible downgrade until Moody's has concluded its
review of the Portuguese government and bank ratings.
Moody's notes that Aaa (sf) rated notes in 2 Portuguese RMBS and
4 ABS transactions are not currently on review. In these transactions,
the credit quality of the assets, the credit enhancement supporting
the notes and the level of operational risk remain consistent with Moody's
highest ratings. However, sovereign or bank rating downgrades
that exceed Moody's current expectation would put increased pressure
on all Portuguese structured finance ratings.
KEY FACTORS CONSIDERED IN THE REVIEW
Asset Pool Performance
Despite the more stable performance of Portuguese RMBS recently,
Moody's expects increasing delinquencies and losses going forward.
"The performance of the outstanding 29 Portuguese RMBS transactions
has stabilized in recent months, and average 60-plus delinquencies
have remained at 1.4% since July 2010" says Maria
Turbica, an Analyst at Moody's. Average outstanding
defaults have also stabilized around 1.7%. However,
"Moody's anticipates further deterioration of RMBS asset performance
in the context of its forecast for very weak economic growth for Portugal
in the next two years and as a consequence of fiscal tightening policy"
adds Mrs. Turbica. In addition, house prices have
resumed falling in the second half of 2010, dropping 1.3%
year-on-year in October 2010.
Moody's analysis will reflect its expectation of the increased delinquencies
and losses. Moody's will re-assess its life-time
loss assumptions for the outstanding RMBS transactions, which it
expects will mostly affect mezzanine and junior notes. Moody's
has not placed on review the A2 (sf) rated note in Pelican Mortgages No.1
PLC because its high credit enhancement is sufficient to withstand significantly
higher than expected losses.
"We expect performance of ABS transactions to deteriorate in the
context of weakening macro-economic conditions and implementation
of austerity measures", explains Ariel Weil, a Vice
President-Senior Analyst at Moody's. Comparing the
current credit enhancement levels in all the Portuguese transactions it
rates to their current and anticipated future performance, Moody's
placed on review for possible downgrade the Class C and D notes of Nova
Finance No. 4 and the most senior outstanding tranche in Chaves
SME CLO 1. "We did not place on review ABS notes that have
credit enhancement levels sufficient to protect against our anticipated
deterioration in asset performance" says Mr. Weil.
Operational Risks
Following the review for possible downgrade of all Portuguese bank ratings,
key factors in the review of the ABS and RMBS include operational risk
and whether structural features in the transactions mitigate this risk.
In its analysis, Moody's will assess the linkage of the notes
to the servicer's credit quality.
Rating reviews on two banks have resulted in actions on the RMBS transactions
that they service. Today's review of the senior note ratings
in Azor Mortgage Public Limited Company and Pelican Mortgage No.1
PLC follows the review for downgrade of their respective servicers,
BANIF- Banco Internacional do Funchal, S.A.
(Baa3/P-3) and Caixa Economica Montepio Geral (Baa3/P-3).
There are currently no mitigants in place to counter the operational risk
in these transactions, such as a back-up servicer or a back-up
servicer trigger, and therefore payment disruptions could occur
.
For two ABS transactions, today's rating review reflects the
operational risk associated with the unrated servicers. The review
of the Aa3 (sf) rated notes in the LTR Finance No. 6 and 8 transactions
and the A1 (sf) rated notes in LTR 8 reflects weaknesses in the operational
risk mitigating structural features. Moody's already downgraded
the senior notes of the LTR transactions in May 2010 to reflect operational
risk concerns. Today's review reflects the weakening of the
banking sector in Portugal for both rated and unrated financial institutions.
Moody's has not placed the ratings of the senior notes of LTR 5
on review because the rating agency expects the issuer to fully redeem
the notes within the next three months based on their recent pace of amortization.
Moody's will conclude its review of Portuguese structured finance
transactions after it concludes its review of the ratings of the Portuguese
government bonds and Portuguese banks.
Detailed rating actions
ABS
Issuer: Chaves SME CLO No. 1
A Certificate, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Jul 9, 2009 Downgraded to A1 (sf)
Issuer: NOVA Finance No. 4 Limited
C Certificate, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec 21, 2007 Assigned A2 (sf)
D Certificate, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec 21, 2007 Assigned Baa3 (sf)
Issuer: LTR Finance No. 6 plc
A Notes, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on May 7, 2010 Downgraded to Aa3 (sf)
Issuer: LTR Finance No. 8 Limited
Senior Facility Certificate, Aa3 (sf) Placed Under Review for Possible
Downgrade; previously on May 7, 2010 Downgraded to Aa3 (sf)
Mezzanine Facility Certificate, A1 (sf) Placed Under Review for
Possible Downgrade; previously on May 7, 2010 Confirmed at
A1 (sf)
RMBS
Issuer: Atlantes Mortgage No. 1 PLC
B, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Feb 19, 2003 Definitive Rating Assigned A2 (sf)
C, Baa3 (sf) Placed Under Review for Possible Downgrade; previously
on Feb 19, 2003 Definitive Rating Assigned Baa3 (sf)
D, Ba2 (sf) Placed Under Review for Possible Downgrade; previously
on Feb 19, 2003 Definitive Rating Assigned Ba2 (sf)
Issuer: Azor Mortgages Public Limited Company
A, Aaa (sf) Placed Under Review for Possible Downgrade; previously
on Nov 25, 2004 Definitive Rating Assigned Aaa (sf)
B, Aa2 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 25, 2004 Definitive Rating Assigned Aa2 (sf)
C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 25, 2004 Definitive Rating Assigned Baa1 (sf)
Issuer: Douro Mortgages No. 1 Notes
C, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 23, 2005 Definitive Rating Assigned A1 (sf)
D, Baa1 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 23, 2005 Definitive Rating Assigned Baa1 (sf)
Issuer: DOURO MORTGAGES No. 2
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Oct 3, 2006 Definitive Rating Assigned A2 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Oct 3, 2006 Definitive Rating Assigned Baa2 (sf)
Issuer: HIPOTOTTA No 5 plc
C, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 23, 2007 Definitive Rating Assigned A1 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 23, 2007 Definitive Rating Assigned Baa2 (sf)
E, Ba3 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 23, 2007 Definitive Rating Assigned Ba3 (sf)
Issuer: HIPOTOTTA NO. 10 LIMITED
C, A3 (sf) Placed Under Review for Possible Downgrade; previously
on Aug 5, 2009 Assigned A3 (sf)
D, Ba1 (sf) Placed Under Review for Possible Downgrade; previously
on Aug 5, 2009 Assigned Ba1 (sf)
E, B1 (sf) Placed Under Review for Possible Downgrade; previously
on Aug 5, 2009 Assigned B1 (sf)
Issuer: Hipototta No. 8 Limited
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Jul 28, 2008 Assigned A2 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Jul 28, 2008 Assigned Baa2 (sf)
E, Ba2 (sf) Placed Under Review for Possible Downgrade; previously
on Jul 28, 2008 Assigned Ba2 (sf)
Issuer: Hipototta No.7 Limited
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 10, 2008 Assigned A2 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 10, 2008 Assigned Baa2 (sf)
E, B1 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 10, 2008 Assigned B1 (sf)
Issuer: HIPOTOTTA No1. PLC
B, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Aug 5, 2003 Assigned A1 (sf)
C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously
on Aug 5, 2003 Assigned Baa1 (sf)
Issuer: Lusitano Mortgages No. 1 PLC
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 16, 2002 Definitive Rating Assigned A2 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 16, 2002 Definitive Rating Assigned Baa2 (sf)
E, Ba1 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 16, 2002 Assigned Ba1 (sf)
Issuer: Lusitano Mortgages No. 2 PLC
C, A3 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 4, 2003 Definitive Rating Assigned A3 (sf)
D, Baa3 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 4, 2003 Definitive Rating Assigned Baa3 (sf)
E, Ba1 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 4, 2003 Definitive Rating Assigned Ba1 (sf)
Issuer: LUSITANO MORTGAGES No. 3 PLC
C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 29, 2008 Downgraded to Baa1 (sf)
D, Ba3 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 29, 2008 Downgraded to Ba3 (sf)
Issuer: Magellan Mortgages No. 1 Public Limited Company
B, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 19, 2001 Definitive Rating Assigned A1 (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 19, 2001 Definitive Rating Assigned Baa2 (sf)
Issuer: Magellan Mortgages No. 2 plc
B, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Oct 27, 2003 Definitive Rating Assigned A1 (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Oct 27, 2003 Definitive Rating Assigned Baa2 (sf)
Issuer: Magellan Mortgages No. 3 plc
B, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 11, 2009 Downgraded to A2 (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 11, 2009 Downgraded to Baa2 (sf)
D, Ba3 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 11, 2009 Downgraded to Ba3 (sf)
Issuer: Magellan Mortgages No. 4 plc
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Jul 18, 2006 Definitive Rating Assigned A2 (sf)
D, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Jul 18, 2006 Definitive Rating Assigned Baa2 (sf)
Issuer: Navigator Mortgage Finance No. 1 plc
C, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Jun 12, 2002 Definitive Rating Assigned A2 (sf)
Issuer: Nostrum Mortgages 2003-1 PLC
B, A2 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 20, 2003 Definitive Rating Assigned A2 (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Nov 20, 2003 Definitive Rating Assigned Baa2 (sf)
Issuer: Pelican Mortgages No. 1 Plc
A, Aaa (sf) Placed Under Review for Possible Downgrade; previously
on Dec 19, 2002 Definitive Rating Assigned Aaa (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Dec 19, 2002 Definitive Rating Assigned Baa2 (sf)
Issuer: Pelican Mortgages No. 2 Plc
B, A1 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 29, 2003 Definitive Rating Assigned A1 (sf)
C, Baa2 (sf) Placed Under Review for Possible Downgrade; previously
on Sep 29, 2003 Definitive Rating Assigned Baa2 (sf)
Issuer: Pelican Mortgages No.3 plc
C, A3 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 30, 2007 Definitive Rating Assigned A3 (sf)
D, Baa3 (sf) Placed Under Review for Possible Downgrade; previously
on Mar 30, 2007 Definitive Rating Assigned Baa3 (sf)
All principal methodologies that Moody's applies when rating structured
finance transactions are available on www.moodys.com in
the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating these transactions can also be found
in this Rating Methodologies sub-directory. In addition,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
Moody's website, at www.moodys.com/SFQuickCheck.
For further information, please visit Moody's website directly or
contact Moody's Client Service Desk (+44 20) 7772 5454.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Madrid
Maria Turbica Manrique
Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Espana, S.A.
Barbara de Braganza, 2
Madrid 28004
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews ratings of 25 Portuguese ABS and RMBS for possible downgrade
