Madrid, November 30, 2011 -- Moody's Investors Service has today downgraded the ratings of 26 tranches
and confirmed the ratings of 6 tranches across 18 Spanish mortgage-backed
securities (RMBS) transactions serviced by Catalunya Banc (Ba1/NP/D).
Today's rating action follows the downgrade of Catalunya Banc to
Ba1 in March 2011. The rating action concludes the review for downgrade
initiated by Moody's on March 2011 or June 2011 depending on the
transaction.
Moody's has also placed on review for downgrade 3 tranches in 2
transactions in consideration of exposure to Catalunya Banc and weaker-than-expected
performance.
Moody's has maintained on review for downgrade the rating of two
tranches in consideration of sovereign risk exposure following the downgrade
of Kingdom of Spain in October 2011 (see "Moody's reviews
for downgrade 112 Spanish RMBS notes following the downgrade of the Kingdom
of Spain", 4 November 2011).
The following link includes a summary of today's rating actions
and their drivers on each tranche of the different deals:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF269076
RATINGS RATIONALE
Today's rating action reflects : (i) lack of back-up
servicer in the transactions serviced by Catalunya Banc, in order
to support payments on the rated tranches in the event of servicer disruption;
(ii) the increased commingling risk in the structures, (iii) the
failure of Catalunya Banc to find a replacement swap counterparty in five
of the transactions and (iV) the performance of the transactions to date.
--SERVICER DISRUPTION RISK
Catalunya Banc (formerly Caixa Catalunya or Caixa Tarragona) services
20 transactions, 19 as sole servicer and one (GAT ICO-FTVPO
1, FTH) as part of a multi-servicer deal administered by
former Caixa Catalunya, Caixa Manresa (now Catalunya Banc),
Caixa Terrassa (now part of Unnim, NR) and Caixa Penedes (now part
of Mare Nostrum, NR).
Moody's has been informed that all 20 transactions will be restructured
in order to address the payment disruption risk related to Catalunya Banc.
However, Moody's has not yet been provided with all final documentation
and information related to the potential back-up servicing arrangement.
Based on the information provided to Moody's, the rating agency
concludes that for these 20 transactions, the maximum achievable
rating is Aa2(sf), if sufficient liquidity is available in the structures.
Ratings have been downgraded to Aa3(sf) for deals with low liquidity and
to A1(sf) for tranches A2 and A3 of Hipocat 10, FTA, which
does not benefit from any liquidity source as its reserve fund is fully
depleted. Moody's did not downgraded tranche A4 as the rating
agency expects it to be repaid in the short term.
Moody's downgraded the senior notes of GAT ICO FTVPO 1, FTH
to Aa3(sf) despite having sufficient liquidity because UNNIM (unrated)
and Mare Nostrum (NR) also act as a servicers in the transaction (together
with Catalunya Banc). Moody's is not aware of any back-up
servicing arrangement being discussed for UNNIM and Mare Nostrum.
Uncertainty mainly stems from the lack of a back-up servicer in
these transactions. If the rating of the servicer, Catalunya
Banc, is downgraded further while no back-up agreement is
in place, the ratings would be negatively affected.
--COMMINGLING RISK
Collections are transferred daily or every 48 hours from Catalunya Banc
to the treasury account held by a P-1 entity in all cases with
the exception of GaT ICO-FTVPO for which Moody's has been
informed the account transfer is in progress. Some of the transactions
include triggers to fund a commingling reserve at the loss of their investment
grade rating. Moody's understands that these reserves have
not been funded as of today and has therefore assessed commingling risk
in all the transactions. Commingling was the main driver of the
downgrade of tranche C of Hipocat 8 FTA and one of the drivers of the
downgrade of mezzanine and junior tranches of Hipocat 4, 5 and 6
FTA, together with swap counterparty exposure.
Uncertainty mainly stems from the exposure to Catalunya Banc as the collection
account bank. If the rating of Catalunya Banc is downgraded further,
in absence of other mitigants to commingling risk, the ratings of
the transactions concerned would be negatively affected
--SWAP COUNTERPARTY EXPOSURE
Moody's has assessed swap counterparty risk for the five transactions
for which Catalunya Banc continues to act as swap counterparty.
According to the transaction documents Catalunya Banc should have been
replaced as swap counterparty or its obligations guaranteed by an eligible
party at loss of its A3/P-2 ratings, on March 2011.
These swaps are providing credit support to the transactions as they guarantee
an amount of excess spread .
Moody's has been informed that the swap counterparty for Hipocat
14 is in the process of being replaced. In this transaction,
Moody's has maintained on review for downgrade the ratings of senior
notes and has placed on review for downgrade the junior and mezzanine
ratings, pending the completion of swap transfer.
Swap exposure was one of the drivers of the downgrade of mezzanine and
junior tranches of Hipocat 4, 5 and 6 FTA, in combination
with commingling exposure.
Uncertainty mainly stems from the exposure to Catalunya Banc as swap provider.
If the rating of Catalunya Banc is downgraded further, in absence
of a replacement to take over the role of swap provider, the ratings
in the five transactions would be negatively affected.
--EXPECTED LOSS ASSUMPTION UPDATE
As part of its analysis Moody's reviewed its current assumption for these
transactions, considering collateral performance to date and the
future outlook for the Spanish RMBS sector. Moody's updated
its expected loss assumption in 4 of the 20 deals serviced by Catalunya
Banc (details provided in the excel attachment).
Moody's decreased its original expected loss assumption for Hipocat 4
and 5 FTA (from 0.7% OB to 0.5% OB in both
cases) in consideration of better-than-expected collateral
performance. This has no rating implication on itself given additional
risks in these transactions, discussed above. Moody's
increased its original expected loss assumption for Hipocat 7 (from 0.5%
OB to 0.9% OB) and 15 FTA (from 0.8% OB to
1.3% OB) in light of performance and current macroeconomic
environment. This has no rating implication for Hipocat 7 FTA given
credit enhancement built up since closing. Moody's has placed
on review for downgrade tranche C of Hipocat 15 FTA for which current
credit enhancement seems not sufficient to withstand performance deterioration.
Expected loss assumptions remain subject to uncertainties such as the
future general economic activity, interest rates and house prices.
If realised recovery rates were to be lower or default rates were to be
higher than assumed, the ratings of some of the transactions could
be negatively affected.
Key modelling assumptions, sensitivities and stress scenarios have
not been updated for GaT ICO-FTVPO 1 FTH where the rating action
has been primarily driven by increased operational risk.
PREVIOUS RATING ACTION & PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS in Europe, Middle East, and Africa,"
published in October 2009. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
In rating these transactions, Moody's used ABSROM to model the cash
flows and determine the loss for each tranche with the exception of GaT
ICO-FTVPO 1 FTH mentioned above. The cash flow model evaluates
all default scenarios that are then weighted considering the probabilities
of the lognormal distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the assets and
the outgoing payments to third parties and note holders. Therefore,
the expected loss for each tranche is the sum product of (i) the probability
of occurrence of each default scenario; and (ii) the loss derived
from the cash flow model in each default scenario for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
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 ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of 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 did not receive or take into account a third-party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
Moody's considers the quality of information available on the rated entities,
obligations or credits 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.
Maria Turbica Manrique
Asst Vice President - 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
Barbara Rismondo
VP - Senior Credit Officer
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 takes action on 19 Spanish RMBS deals in consideration of exposure to Catalunya Banc
