London, 14 March 2014 -- Moody's Investors Service announced today that it has upgraded the rating
of five Spanish multi-issuer covered bonds (SMICBs) leaving one
series on direction uncertain, and confirmed the rating of two series.
At the same time, Moody's maintained the current rating and review
for downgrade or uncertain status of forty three series.
Please click this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF360022
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 incorporate the following developments (i) upgrade
of the Spanish government bond rating from Baa3 STA to Baa2 POS on 21st
February 2014 and the revision of the Spanish sovereign ceiling from A3
to A1 (ii) revision of the TPI for Cedulas from Improbable to Probable
on 13 December 2013 (iii) the implementation of the new anchor points
for covered bonds (iv) updated Spanish bank ratings including the upgrades
of Banco Santander S.A. (Spain) and BBVA on 04 March 2014
and (v) updated information on the underlying mortgage pools. For
further details on items (i), (ii) and (iii) please refer to the
following press releases:
(i) Moody's upgrades Spain's government bond rating to Baa2; assigns
positive outlook (21 February 2014) https://www.moodys.com/research/Moodys-upgrades-Spains-government-bond-rating-to-Baa2-assigns-positive--PR_292078
(ii) Moody's takes multiple actions on Spanish covered bonds; raises
Spanish TPIs to Probable (13 December 2013) https://www.moodys.com/research/Moodys-takes-multiple-actions-on-Spanish-covered-bonds-raises-Spanish--PR_288701
(iii) CB Anchors (12 March 2014) http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF359933
Moody's has upgraded the rating of five series because of an improvement
in the expected loss of the SMICBs (as defined below) since Moody's last
review, deriving largely from items (i) to (v) in the paragraph
above. In one of these five series, one of the underlying
participant's rating remains on review uncertain, so Moody's
has retained the review uncertain on its new rating.
Moody's has confirmed the rating of two series where there is no material
change in the expected loss and the rating of none of the underlying participants
is on review.
In forty three series Moody's has maintained the current rating
and the review status. These series exhibit no material change
in the expected loss, however, in all of these series the
ratings of one or more participants remain on review uncertain or downgrade.
Moody's will conclude the review of these forty three series once
the review status of the underlying participants is resolved.
Moody's notes that Spain's country ceiling has been upgraded from A3 to
A1. As a result, the highest achievable rating for Spanish
covered bonds is now A1(sf).
Loss and Cash Flow Analysis:
The ratings assigned by Moody's address the expected loss posed to investors.
SMICBs can be considered as a repackaging of a pool of Spanish covered
bonds. Each SMICB is backed by a group of Spanish covered bonds
(Cédulas Hipotecarias, CHs) that are bought by a Fund,
which in turn issues SMICBs. Moody's rating for any SMICB is determined
after applying a two-step process:
First step: Moody's determines a rating based on the expected loss
on the SMICB.
The main driver of the expected loss (EL) of a SMICB is the credit strength
of the CHs backing the SMICBs. If the CHs perform, the SMICBs
will be fully repaid. CHs are rated according to Moody's published
covered bond methodology. In the absence of any other support (for
example, such as a reserve fund), the EL of the SMICB is determined
directly from the weighted-average EL (weighted by their outstanding
amounts) of the CHs backing the SMICB.
The primary model used is Moody's Covered Bond Model (COBOL), which
determines EL as a function of (i) the issuer's probability of default
(measured by its long-term rating); and (ii) the stressed
losses on the cover pool assets, following issuer default.
Second step: A secondary rating target for SMICBs is the timely
payment.
Under the SMICB rating approach, Moody's gives value to two primary
liquidity supports that improve the probability of timely payment if any
CH backing the SMICBs fails to make a payment on a scheduled payment date.
These are (i) the maturity extension on the SMICBs, which should
ensure that a period of at least two years is available following any
default on the CH (this period would be available to realise the value
of the assets backing the CH); and (ii) a liquidity facility (LF)
that is available to cover interest payments on the SMICBs. Under
the SMICB rating method, the LF benefiting any SMICB can be sized
to improve the timely payment of the SMICB to a level commensurate with
the SMICBs' ratings.
Factors that would lead to an upgrade or downgrade of the ratings:
The robustness of a structured multi-issuer covered bond rating
largely depends on the underlying issuer's' credit strength, and
the support provided by the liquidity facility and reserve fund,
if any.
A multiple-notch upgrade or downgrade of the SMICBs might occur
in certain limited circumstances, such as (i) a sovereign upgrade
or downgrade affecting the issuers' senior unsecured rating; (ii)
a multiple-notch upgrade or downgrade of the issuers; or (iii)
a material change of the value of the cover pool.
Methodology Underlying the Rating Action:
The methodologies used in these ratings were "Moody's Approach to Rating
Covered Bonds", published in March 2014 and "Moody's Approach to
Rating Spanish Multi-Issuer Covered Bonds," published in
September 2009. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
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.
Moody's describes its loss and cash flow analysis in the section "Ratings
Rationale" of this press release.
Moody's did not use any stress scenario simulations in its analysis.
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.
Hemal Shah
Asst Vice President - Analyst
Structured Finance Group
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
Neelam S Desai
Senior Vice President/Manager
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 multiple rating actions on Spanish multicedulas
