London, 20 March 2015 -- Moody's Investors Service has today taken rating actions on asset-backed
securities (ABS) and residential mortgage-backed securities (RMBS)
transactions across Europe, the Middle East and Africa (EMEA),
after the rating agency updated several of its structured finance rating
methodologies, combined with the rating review placements for certain
banks that its revised bank methodology triggered (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_321005).
Specifically, Moody's has placed 504 notes on review for upgrade
and 9 notes on review for downgrade across 182 EMEA RMBS deals,
and 42 EMEA ABS deals.
Moody's has updated several cross-sector, primary and
secondary rating methodologies for structured finance securities,
to incorporate a new counterparty risk (CR) Assessment introduced for
banks as part of its revised bank rating methodology (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_179038).
The updates to the structured finance rating methodologies combined with
rating review placements for certain banks prompted today's rating
review actions on the ABS and RMBS notes. Please refer to the announcement
of the changes to Moody's global approach to rating structured finance
transactions and covered bonds released on 16 March 2015. (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320674).
Please click on this http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF400160
for the List of Affected Credit Ratings. This list is
an integral part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Today's rating actions reflect (1) the updates to Moody's
structured finance rating methodologies to incorporate the new CR Assessment
for banks; and (2) the rating review actions of banks resulting from
its revised bank methodology.
The updates to the structured finance rating methodologies have an overall
positive rating impact on EMEA ABS and RMBS transactions. In the
European Union, the CR Assessment will generally be at least at
bank deposit rating level, leading to the placement on review for
upgrade of 504 notes across 220 EMEA ABS and RMBS. Moody's
has placed on review for downgrade 9 notes in 4 EMEA RMBS following the
placement on review for downgrade of some key counterparties' deposit
rating and/or senior unsecured rating.
--- INTRODUCTION OF NEW COUNTERPARTY RISK (CR) ASSESSMENT
Moody's introduced a new CR Assessment for banks as part of its
revised bank rating methodology. The CR Assessment reflects an
issuer's ability to avoid defaulting on certain obligations and
contractual commitments, to include payment obligations associated
with derivatives, letters of credit, third-party guarantees,
servicing and trustee obligations and other operational obligations.
For the EU, Moody's expects that the probability of failing
to maintain these key operations or of defaulting on the relevant payment
obligations could be lower than indicated by the senior unsecured debt
ratings. The CR Assessment will therefore be likely positioned
at least at the level of bank deposit ratings.
Moody's uses internal guidance on the CR Assessments to assess the
rating impact on outstanding structured finance transactions. The
internal guidance is in line with the guidance published in its updated
bank rating methodology and its responses to frequently asked bank methodology-related
questions.
Where relevant, the approximate CR Assessment values used in structured
finance credit analysis will factor in guidance on expected changes to
the baseline credit assessment (BCA), senior unsecured debt and
bank deposit ratings.
UPDATES TO THE STRUCTURED FINANCE RATING METHODOLOGIES
Moody's has updated several of its cross-sector methodologies
to incorporate the CR Assessments in its analysis of structured finance
transactions. Moody's now matches banks' exposure in
structured finance transactions to one of the three reference points:
either the CR Assessment, bank deposit rating or senior unsecured
rating.
Moody's uses CR Assessments to measure the risk of default for (1)
operational risk exposures (including exposures to servicers, cash
managers and trustees); (2) exposures to swap counterparties;
and (3) exposures to servicers in relation to commingling risk.
Moody's uses the bank deposit rating to measure the default risk
for exposures associated with account banks and set-off.
Additionally, for bank-related exposures --
e.g., deposits held at a defaulting bank --
Moody's now assumes a recovery rate of 45% in instances when
the risk is measured or modelled.
Moody's uses the senior unsecured debt rating for senior unsecured
debt and other exposures that carry similar credit risks.
--- ANTICIPATED COMPLETION OF THE PLACEMENTS ON REVIEW
Moody's expects to conclude the majority of the structured finance
rating reviews in the first half of 2015. The timeline to resolve
these reviews will depend on the resolution process applied to the underlying
bank ratings, as well as the assignment of CR Assessments.
Additionally, some of the ratings already on review for upgrade
in EMEA RMBS and ABS are also impacted by the revised methodology even
if not included in today's action. These ratings will be
reviewed considering the revised methodologies.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors or circumstances that could lead to an upgrade of the ratings
are (1) a lower probability of high-loss scenarios owing to an
upgrade of the country ceiling; (2) performance of the underlying
collateral that exceeds Moody's expectations; (3) deleveraging
of the capital structure; and (4) improvements in the credit quality
of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the ratings
are (1) an increased probability of high-loss scenarios owing to
a downgrade of the country ceiling; (2) performance of the underlying
collateral that does not meet Moody's expectations; (3) deterioration
in the notes' available CE; and (4) deterioration in the credit
quality of the transaction counterparties.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF400160
for the List of Affected Credit Ratings. This list is
an integral part of this Press Release and provides, for each of
the credit ratings covered, Moody's disclosures on the following
items:
- Lead analyst
- Key Rationale for Action
- Principal Methodology
- National Scale Credit Ratings
- Person Approving the Credit Rating
- Releasing office
- Loss and Cash Flow Analysis
- Stress Scenarios
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
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.
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.
Anne-Sophie Spirito
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carole Gintz
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Ali Khan
Associate Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's takes actions on multiple EMEA RMBS and ABS notes' ratings
