Milan, November 27, 2020 -- Moody's Investors Service, ("Moody's") has
today upgraded the ratings of nine notes and affirmed the ratings of four
notes in three Spanish RMBS deals. The rating action reflects:
- Better than expected collateral performance
- The increased levels of credit enhancement for the affected notes
Moody's affirmed the ratings of the notes that had sufficient credit enhancement
to maintain the current rating on the affected notes.
Issuer: MADRID RMBS I, FTA
....EUR 1340M Class A2 Notes, Affirmed
Aa1 (sf); previously on Jun 29, 2018 Affirmed Aa1 (sf)
....EUR 70M Class B Notes, Upgraded
to Aa2 (sf); previously on Jun 29, 2018 Upgraded to A1 (sf)
....EUR 75M Class C Notes, Upgraded
to Ba1 (sf); previously on Jun 29, 2018 Upgraded to Ba3 (sf)
....EUR 34M Class D Notes, Upgraded
to Caa3 (sf); previously on Sep 11, 2009 Downgraded to C (sf)
Issuer: MADRID RMBS II, FTA
....EUR 936M Class A2 Notes, Affirmed
Aa1 (sf); previously on Jun 29, 2018 Affirmed Aa1 (sf)
....EUR 270M Class A3 Notes, Affirmed
Aa1 (sf); previously on Jun 29, 2018 Affirmed Aa1 (sf)
....EUR 63M Class B Notes, Upgraded
to Aa2 (sf); previously on Jun 29, 2018 Upgraded to A1 (sf)
....EUR 67.5M Class C Notes,
Upgraded to Ba1 (sf); previously on Jun 29, 2018 Upgraded to
Ba3 (sf)
....EUR 30.6M Class D Notes,
Upgraded to Caa3 (sf); previously on Sep 11, 2009 Downgraded
to C (sf)
Issuer: MADRID RMBS III, FTA
....EUR 1575M Class A2 Notes, Upgraded
to Aa3 (sf); previously on Jun 29, 2018 Upgraded to A1 (sf)
....EUR 497M Class A3 Notes, Upgraded
to Aa3 (sf); previously on Jun 29, 2018 Upgraded to A1 (sf)
....EUR 55.5M Class B Notes,
Affirmed B2 (sf); previously on Jun 29, 2018 Affirmed B2 (sf)
....EUR 90M Class C Notes, Upgraded
to Caa1 (sf); previously on Sep 11, 2009 Downgraded to Ca (sf)
Maximum achievable rating is Aa1 (sf) for structured finance transactions
in Spain, driven by the corresponding local currency country ceiling
of the country.
RATINGS RATIONALE
The rating action is prompted by:
- Decrease in key collateral assumptions, namely the portfolio
Expected Loss (EL) and MILAN CE assumptions due to better than expected
collateral performance
- An increase in credit enhancement for the affected tranches
Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed its lifetime loss
expectation for the portfolio reflecting the collateral performance to
date.
The performance of the transactions has continued to improve since the
last rating actions on all the affected transactions. Total delinquencies
have increased only marginally in the past year, with 90 days plus
arrears currently standing at 0.14%, 0.12%
and 0.25% of current pool balance, respectively,
for MADRID RMBS I, FTA, MADRID RMBS II, FTA and MADRID
RMBS III, FTA. Cumulative defaults have been broadly stable
at 19.73%, 21.26% and 22.90%
of original pool balance, respectively, for MADRID RMBS I,
FTA, MADRID RMBS II, FTA and MADRID RMBS III, FTA over
the past year.
Moody's decreased the expected loss assumption to 11.60%,
12.45% and 13.65% as a percentage of original
pool balance, respectively, for MADRID RMBS I, FTA,
MADRID RMBS II, FTA and MADRID RMBS III, FTA from 11.89%,
12.77% and 14.00%, respectively,
due to the improving performance.
Moody's updated the MILAN CE due to the Minimum Expected Loss Multiple,
a floor defined in Moody's methodology for rating EMEA RMBS transactions.
As a result, Moody's has decreased the MILAN CE assumptions
to 21.00%, 21.00% and 23.00%,
respectively, for MADRID RMBS I, FTA, MADRID RMBS II,
FTA and MADRID RMBS III, FTA.
Increase in Available Credit Enhancement
Replenishment of the reserve fund for MADRID RMBS I, FTA and MADRID
RMBS II, FTA and a reduction in the unpaid principal deficiency
ledger for MADRID RMBS III, FTA led to the increase in the credit
enhancement available in these transactions.
For instance, the credit enhancement for the most senior tranches
upgraded in today's rating action increased to 23.51%,
24.49% and 23.60% from 18.07%,
19.11% and 18.45%, respectively,
on MADRID RMBS I, FTA, MADRID RMBS II, FTA and MADRID
RMBS III, FTA since the last rating action.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of consumer assets from the
current Spanish economic activity and a gradual recovery for the coming
months. Although an economic recovery is underway, it is
tenuous and its continuation will be closely tied to containment of the
virus. As a result, the degree of uncertainty around our
forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in May 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1228742.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The analysis undertaken by Moody's at the initial assignment of ratings
for RMBS securities may focus on aspects that become less relevant or
typically remain unchanged during the surveillance stage. Please
see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further
information on Moody's analysis at the initial rating assignment and the
on-going surveillance in RMBS.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings
include: (1) performance of the underlying collateral that is better
than Moody's expected; (2) an increase in available credit enhancement;
(3) improvements in the credit quality of the transaction counterparties;
and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include: (1) an increase in sovereign risk; (2) performance
of the underlying collateral that is worse than Moody's expected;
(3) deterioration in the notes' available credit enhancement; and
(4) deterioration in the credit quality of the transaction counterparties.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to one of the credit rating
outcomes announced and described above.
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.
Giovanni Ferretti
Analyst/ML
Structured Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
