Madrid, July 02, 2013 -- Moody's Investors Service has today downgraded the ratings on the covered
bonds issued under five Spanish covered bond programmes. These
rating actions follow Moody's decision to downgrade the senior unsecured
ratings of the issuers that support those covered bonds.
Specifically, Moody's has:
(1) downgraded to Ba1 from Baa1 (on review, direction uncertain)
the ratings of the mortgage covered bonds and public-sector covered
bonds issued by Bankia, S.A. (deposits B1 negative,
standalone bank financial strength rating (BFSR) E+/ baseline credit
assessment b3 negative);
(2) downgraded to Ba2 from Ba1 (on review for downgrade) the ratings of
the mortgage covered bonds and public-sector covered bonds issued
by Catalunya Banc, S.A. (B3 negative, BFSR E/BCA
caa2 stable); and
(3) downgraded to Ba2 from Ba1 (on review for downgrade) the ratings of
the mortgage covered bonds issued by NCG Banco, S.A.
(B3 negative, BFSR E/BCA caa2 stable).
RATINGS RATIONALE
Today's rating actions are prompted by Moody's decision to
downgrade the senior unsecured ratings of Bankia, Catalunya Banc
and NCG Banco. The TPIs Moody's assigns to the issuers'
covered bond programmes remain "Improbable".
For further information on the rating actions taken by Moody's Financial
Institutions Group, please refer to http://www.moodys.com/research/Moodys-downgrades-ratings-of-BFABankia-Catalunya-Banc-and-NCG-Banco--PR_276008 "Moody's downgrades ratings
of BFA/Bankia, Catalunya Banc and NCG Banco" published on
02 July 2013.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step
process: an expected loss analysis and a TPI 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 issuer's probability
of default (measured by the issuer's rating); and (2) the stressed
losses on the cover pool assets following issuer default.
For the covered bond programmes listed below, cover pool losses
are an estimate of the losses Moody's currently models if the relevant
issuer defaults. Moody's splits cover pool between market
risk and collateral risk. Market risk measures losses stemming
from refinancing risk and risks related to interest-rate and currency
mismatches (these losses may also include certain legal risks).
Collateral risk measures losses resulting directly from the cover pool
assets' credit quality. Moody's derives collateral
risk from the collateral score.
For each cover pool below, the numbers show that Moody's is
not relying on "uncommitted" over-collateralisation
(OC) in its expected loss analysis.
(1) BANKIA'S MORTGAGE COVERED BONDS
The cover pool losses are 37%, with market risk of 22.6%
and collateral risk of 14.4%. The collateral score
for this programme is currently 21.6%. The OC in
this cover pool is 74.2%, of which Bankia provides
25% on a "committed" basis. The minimum OC level
that is consistent with the Ba1 rating target is 4%.
(2) BANKIA'S PUBLIC-SECTOR COVERED BONDS
The cover pool losses are 50%, with market risk of 33.6%
and collateral risk of 16.4%. The collateral score
for this programme is currently 32.7%. The OC in
this cover pool is 78.1%, of which Bankia provides
42.9% on a "committed" basis. The minimum
OC level that is consistent with the Ba1 rating target is 10%.
(3) CATALUNYA BANC'S MORTGAGE COVERED BONDS
The cover pool losses are 35.2%, with market risk
of 21.9% and collateral risk of 13.4%.
The collateral score for this programme is currently 20%.
The over-collateralisation (OC) in this cover pool is 86.3%,
of which Catalunya Banc provides 25% on a "committed"
basis. The minimum OC level that is consistent with the Ba2 rating
target is 5.5%.
(4) CATALUNYA BANC'S PUBLIC-SECTOR COVERED BONDS
The cover pool losses are 44.8%, with market risk
of 22.1% and collateral risk of 22.7%.
The collateral score for this programme is currently 45.3%.
The OC in this cover pool is 180.1%, of which Catalunya
Banc provides 42.9% on a "committed" basis.
The minimum OC level that is consistent with the Ba2 rating target is
20.5%.
(5) NCG BANCO'S MORTGAGE COVERED BONDS
The cover pool losses are 35.3%, with market risk
of 21.7% and collateral risk of 13.7%.
The collateral score for this programme is currently 20.4%.
The OC in this cover pool is 100.6%, of which NCG
Banco provides 25% on a "committed" basis. The
minimum OC level that is consistent with the Ba2 rating target is 6%.
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. All numbers in
this section are based on the most recent Performance Overviews and on
Moody's most recent modelling.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which indicates the likelihood that the issuer will make timely payments
to covered bondholders if the issuer defaults. The TPI framework
limits the covered bond rating to a certain number of notches above the
issuer's rating.
The TPIs assigned to these programmes are "Improbable".
SENSITIVITY ANALYSIS
The issuer's credit strength is the main determinant of a covered
bond rating's robustness. The TPI Leeway measures the number
of notches by which Moody's might downgrade the issuer's rating
before the rating agency downgrades the covered bonds because of TPI framework
constraints.
Based on the current TPI of "Improbable", the TPI Leeway
for both Bankia's programmes is one notch. This implies that
Moody's might downgrade the covered bonds because of a TPI cap,
if it downgrades the issuer rating below B2, all other variables
being equal.
Based on the current TPI of "Improbable", the TPI Leeway
for both Catalunya Banc's programmes is limited. This implies
that 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 NCG Banco's programme is limited. This implies that 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, 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 July 2012. 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 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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 takes actions on five Spanish covered bond programmes
