London, 01 August 2014 -- Moody's Investors Service announced today that it has upgraded the rating
of ten Spanish multi-issuer covered bonds (SMICBs), downgraded
ten series, confirmed twenty-two series and affirmed three
series.
Please click this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF376259
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 recent developments on
Spanish bank ratings including (i) the upgrade of Banco de Caja Espana
de Inversiones(Banco CEISS) from B3 (UNC) to B2, (ii) the confirmation
of Unicaja Banco's Ba3 rating, (iii) the downgrade of NCG
Banco S.A. from B3 (DNG) to Caa1, (iv) the downgrade
of Banco Espirito Santo, S.A. from Ba3 (DNG) to B2
(DNG) and (v) placement of Catalunya Banc SA's rating on review
for upgrade from B3 (DNG).
The credit quality of one issuer has been assessed through a credit estimate.
This issuer participates in thirty one series with an average exposure
of 15.5% and a maximum exposure of 30.8%.
As part of its base case, Moody's has stressed large concentrations
of single obligors bearing a credit estimate as described in "Updated
Approach to the Usage of Credit Estimates in Rated Transactions,"
published in October 2009 and available at https://www.moodys.com/research/PBC_120461
Today's actions also take into account updated information on the
underlying mortgage pools of participating issuers.
Moody's has upgraded the rating of ten series either because of an improvement
in the expected loss of the SMICBs (as defined below) since Moody's last
review and/or the resolution of the watch status of the rating of the
participating issuers.
Moody's has downgraded the rating of ten series. In nine series
the downgrades result from a significant exposure to issuers rated Caa1
or the issuer assessed through a credit estimate. Moody's
notes that IM Cedulas 9, FTA has a 6% exposure to Banco Espirito
Santo, whose rating is on review for downgrade. A two notch
stress to this issuer's rating resulted in no material change to
the expected loss for this series.
The downgrade of AyT Cedulas Cajas VIII, FTA- Sub Loan A
to Caa1 (sf) results from a small interest shortfall caused by a mid-period
transfer in 2012 of the related treasury account from Instituto de Credito
Oficial to Barclays. This shortfall is not expected to be cured
by scheduled maturity in November 2014, so the sub loan providers
are unlikely to receive the promised principal and interest payments in
full.
In three series Moody's has affirmed current ratings. These
series exhibit no material change in the expected loss and in all of these
series there are no participants on review upgrade, uncertain or
downgrade.
Moody's has confirmed the rating of twenty-two series where there
is no change in the expected loss and the rating of none of the underlying
participants is on review for downgrade or on review uncertain.
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 rating:
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 downgrade of the SMICBs might occur in certain
limited circumstances, such as (i) a sovereign downgrade negatively
affecting the issuers' senior unsecured rating; (ii) a multiple-notch
downgrade of the issuers or downgrade to low sub-investment grade;
or (iii) a material reduction of the value of the cover pool.
Catalunya Banc SA (B3 UPG) participates in fourteen series with an average
exposure of 11.7% and a maximum exposure of 42.9%.
These series will be reviewed upon resolution of the watch status of this
issuer. This may result in upgrades to some or all of these series.
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.
Raja Iyer
Vice President - Senior 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
Hemal Shah
AP-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 multiple rating actions on Spanish multicedulas
