Madrid, April 16, 2014 -- Moody's Investors Service has today upgraded the ratings of three notes,
confirmed the ratings of three notes and downgraded the rating of one
note in two Spanish residential mortgage-backed securities (RMBS)
transactions: HIPOCAT 6, FTA (HIPOCAT 6) and IM CAJAMAR 1,
FTA (IM CAJAMAR 1).
The rating of tranche A in HIPOCAT 6 was placed on review direction uncertain
and the ratings of tranches A and B in IM CAJAMAR 1 were placed on review
for upgrade on 17 March 2014, following the upgrade of the Spanish
Sovereign rating to Baa2 from Baa3 and the resulting increase of the local-currency
country ceiling to A1 from A3 (https://www.moodys.com/research/Moodys-takes-rating-actions-on-Spanish-ABS-and-RMBS-transactions--PR_294803).
At the same time, the ratings of classes B and C in HIPOCAT 6 and
C and D in IM CAJAMAR 1 were changed to on review direction uncertain
from on review for downgrade. These notes had been placed on review
for downgrade on 14 November 2013, in relation to swap counterparty
exposure following the introduction of the rating agency's updated approach
to assessing swap counterparty linkage in structured finance transactions
(https://www.moodys.com/research/Moodys-reviews-for-downgrade-EMEA-RMBS-and-ABS-transactions-due--PR_286515).
Today's actions conclude the review of the seven notes mentioned
above after a revision of key collateral assumptions and a detailed analysis
of decreased sovereign risk and counterparty risk taking into account
the new approach to swap counterparty linkage. Rating upgrades
were driven by the increase of the local-currency country ceiling
to A1 from A3. Counterparty exposure and key collateral assumption
update, prompted today's rating downgrade. Ratings
on tranches for which reduced country risk offsets performance or counterparty
considerations were confirmed.
See towards the end of the ratings rationale section of this press release
for a detailed list of affected ratings.
RATINGS RATIONALE
Today's actions are the result of a detailed analysis of counterparty
risk and decreased sovereign risk, in combination with revision
of key collateral assumptions. Rating upgrades were driven by the
increase of the local-currency country ceiling to A1 from A3.
Counterparty exposure and the key collateral assumption update,
which the reduced country risk does not mitigate, prompted today's
rating downgrade. Ratings on tranches for which reduced country
risk offsets performance or counterparty considerations were confirmed.
In addition, in the context of the full rating review for HIPOCAT
6, the following inputs were corrected: the reserve fund position
in the waterfall was corrected and current overcollateralization was modeled.
These corrections have a positive impact on the rating of classes B and
C notes.
-- Positive impact of Reduced Sovereign Risk
The Spanish country ceiling, and therefore the maximum rating that
Moody's will assign to a domestic Spanish issuer including structured
finance transactions backed by Spanish receivables, has been increased
to A1 from A3. Moody's Individual Loan Analysis Credit Enhancement
(MILAN CE) represents the required credit enhancement under the senior
tranche for it to achieve the country ceiling. By increasing the
maximum achievable rating for a given MILAN, the revised methodology
alters the loss distribution curve and implies a reduced probability of
high loss scenarios.
-- Key collateral assumptions
Moody's has increased EL assumption as a percentage of original pool balance
in these transactions from 0.5% to 1% in the case
of HIPOCAT 6 and from 1% to 1.2% for IM CAJAMAR 1.
Moody's has not revised the Milan CE assumption for these deals.
The MILAN CE assumptions remain at 12.5% and 10%
respectively.
The performance of HIPOCAT 6 has deteriorated significantly in the last
months. 90+ arrears as a percentage of pool's current
balance increased from 1.42% as of December 2012 to 3.57%
as of December 2013. Given the long write-off definition
- 36 months versus the 12 months or 18 months standard in the market
- the increase in delinquencies has not yet been followed by reserve
fund draws.
The performance of IM CAJAMAR 1 has been more stable. 90+
arrears as a percentage of pool's current balance increased from
0.44% as of January 2013 to 0.56% as of January
2014. Cumulative defaults as a percentage of original balance increased
from 1.25% to 1.41% in the same period.
Reserve Fund is at target level. Expected loss was slightly increased
for this deal in consideration of deal trend in the context of negative
outlook for Spanish RMBS. The increase in expected loss has some
negative impact on the ratings of the notes.
-- Exposure to Counterparty Risk
The conclusion of Moody's rating review of HIPOCAT 6 takes into
consideration the exposure to Catalunya Banc S.A. (Catalunya
Banc, B3/NP) which acts as Servicer and swap counterparty.
The exposure to the servicer is not driving today's action on this
deal.
The conclusion of Moody's rating review of IM CAJAMAR 1 takes into
consideration the exposure to Cajas Rurales Unidas which acts as Servicer
and to Banco Cooperativo Español, S.A. (Banco
Cooperativo, Ba2/NP) as swap counterparty. The exposure to
the servicer has some negative impact on the ratings of the notes.
Treasury Account is held by BNP Paribas Securities Servicers (A1/P-1)
for both transactions.
As part of its review, Moody's has incorporated the risk of additional
losses on the notes in the event of them becoming un-hedged after
a swap counterparty default, following the rating agency's updated
approach to assessing swap counterparty linkage in structured finance
cash flow transactions ("Approach to Assessing Swap Counterparties in
Structured Finance Cash Flow Transactions" published on the 12 November
2013):
--HIPOCAT 6
Assets backing the notes in this deal are referenced to the 12-month
Euro Interbank Offered Rate (EURIBOR), 12-month Madrid Inter-Bank
Offered Rate (MIBOR), I.R.P.H Cajas (Reference
Rate for Saving Banks loans) and I.R.P.H Entidades
(Reference Rate for financial entities' loans) while notes are referenced
to three-month EURIBOR. The transaction includes a swap
agreement with Catalunya Banc to hedge this risk. The swap is a
basis risk swap, which provides 65bps of excess spread to the transaction.
Swap notional excludes loans in arrears for more than 3 months or loans
in grace periods for longer than 3 months.
The swap agreements are consistent with Moody's swap framework and
have an original collateral provision. Swap exposure does not have
a negative impact on the ratings of the notes as of today.
Moody's understands that no swap collateral account has been opened for
HIPOCAT 6 given no collateral needs to be posted for this deal,
according to collateral posting computations made by the valuation agent.
--IM CAJAMAR 1
Assets backing the notes in this deal are referenced to the 12-month
Euro Interbank Offered Rate (EURIBOR), 12-month Madrid Inter-Bank
Offered Rate (MIBOR), I.R.P.H Cajas (Reference
Rate for Saving Banks loans) and I.R.P.H Entidades
(Reference Rate for financial entities' loans) while notes are referenced
to three-month EURIBOR. The transaction includes a swap
agreement with Banco Cooperativo to hedge this risk. The swap is
a basis risk swap, which provides 60bps of excess spread to the
transaction. Swap notional excludes delinquent loans.
The swap agreement is not consistent with Moody's swap framework.
Swap exposure has some negative impact on the rating of the class D notes
as of today.
Moody's understands that no swap collateral account has been opened for
IM CAJAMAR 1 given no collateral needs to be posted for this deal,
according to collateral posting computations made by the valuation agent.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to a downgrade of the ratings
affected by today's action would be the worse-than-expected
performance of the underlying collateral, deterioration in the credit
quality of the counterparties and an increase in sovereign risk.
Factors or circumstances that could lead to an upgrade of the ratings
affected by today's action would be the better-than-expected
performance of the underlying assets, and a decline in both counterparty
and sovereign risk.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in March 2014.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
LIST OF AFFECTED RATINGS
Issuer: HIPOCAT 6, FTA
....EUR787.6M Class A Notes,
Upgraded to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed
Under Review Direction Uncertain
....EUR15.7M Class B Notes, Confirmed
at Baa2 (sf); previously on Mar 17, 2014 Baa2 (sf) Placed Under
Review Direction Uncertain
....EUR34M Class C Notes, Confirmed
at Ba2 (sf); previously on Mar 17, 2014 Ba2 (sf) Placed Under
Review Direction Uncertain
Issuer: IM CAJAMAR 1, FTA
....EUR353.3M Class A Notes,
Upgraded to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed
Under Review for Possible Upgrade
....EUR9.3M Class B Notes, Upgraded
to Baa3 (sf); previously on Mar 17, 2014 Ba1 (sf) Placed Under
Review for Possible Upgrade
....EUR4.1M Class C Notes, Confirmed
at Ba3 (sf); previously on Mar 17, 2014 Ba3 (sf) Placed Under
Review Direction Uncertain
....EUR3.3M Class D Notes, Downgraded
to B3 (sf); previously on Mar 17, 2014 B2 (sf) Placed Under
Review Direction Uncertain
REGULATORY DISCLOSURES
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.
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.
As the section on loss and cash flow analysis describes, 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 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.
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.
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
Christophe de Noaillat
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 multiple actions on 2 Spanish RMBS transactions, HIPOCAT 6 and IM Cajamar 1
