Highest rating for Greek structured finance securities is now Ba3(sf)
Madrid, August 18, 2014 -- Moody's Investors Service has today upgraded 20 notes, affirmed
one note and placed one note on watch for upgrade in nine Greek structured
finance transactions. This follows Moody's raising of its country
ceiling on Greece to Ba3 from B3 and its upgrade of Greece's sovereign
rating to Caa1 from Caa3. Moody's has also reassessed collateral
performance and revised portfolio assumptions in three transactions.
The raising of Greece's country ceiling to Ba3 reflects the improvement
in Greece's economic outlook, the significant improvement in Greece's
fiscal position over the past year and the government's reduced interest
burden and lengthened maturities of the debt. As a result of today's
rating actions, the highest rating for outstanding Greek structured
finance securities is now Ba3 (sf), up from B3 (sf) previously.
A detailed list of today's rating actions is included towards the end
of this press release before the regulatory disclosure section.
RATINGS RATIONALE
--HIGHEST RATING FOR GREEK STRUCTURED FINANCE TRANSACTIONS
IS NOW Ba3 (sf)
Today's rating actions reflect Moody's upgrade of its assessment of the
highest rating that can be assigned to debt obligations issued by domestic
Greek issuers, or where cash flows used to repay debt obligations
are sourced from domestic Greek assets, to Ba3. This new
maximum achievable rating applies to all forms of ratings in Greece,
including structured finance ratings.
-- APPROACH USED FOR RMBS RATINGS
MILAN CE is a key input in the RMBS methodology used to calibrate the
loss distribution in the cash flow model, however given the low
level of the Greek country ceiling, and the relatively high level
of expected losses, a MILAN CE that would generate the desired loss
distribution cannot be established. Therefore Moody's did
not carry out the cash flow analysis to determine the note rating,
but rather used a qualitative approach. The ratings were positioned
according to the ratio of the note credit enhancement to the portfolio
expected loss (CE/EL). The position in the capital structure as
well as note size were also taken into account in the ratings.
According to the approach, senior notes with a CE/EL ratio of 2
or above can achieve a Ba3 (sf) rating, whereas a mezzanine or junior
note with the CE/EL ratio of 2 would on average achieve a Caa1 (sf) rating.
If CE/EL ratio approximately equals 1, a senior note would likely
achieve a B1 (sf) rating, whereas a mezzanine or junior note would
likely achieve a Caa3(sf) rating. The note ratings corresponding
to the various CE/EL levels were determined using a test cashflow model
run with the loss calibrated using a MILAN CE that equals the expected
loss.
--SIX SENIOR NOTES UPGRADED ON SUFFICIENT CREDIT ENHANCEMENT
Moody's assessed the current credit enhancement (CE) level under each
senior RMBS note and compared it against the observed performance and
the expected loss for each transaction. Moody's upgraded six senior
notes to Ba3 (sf), with CE covering more than three times the expected
loss level. Moody's upgraded Estia Mortgage Finance II PLC to B1
(sf), with a CE only slightly above the expected loss level.
--MOODY'S ALSO UPGRADED A NUMBER OF SUBORDINATED NOTES
Moody's upgraded most mezzanine and junior notes, taking into account
the notes' CE levels compared to the expected loss assumed for each transaction.
Small subordinated notes are subject to higher severities given that 1)
available cash flows would first be allocated to the senior notes;
and 2) any allocation of losses in smaller tranches results in a higher
severity compared to the same level of losses in a much larger note.
As a result, Moody's upgraded twelve subordinated notes in six transactions
to levels ranging from B1 (sf) to Caa2 (sf) and affirmed one junior note
at Caa3 (sf) for which the current CE level is lower than the expected
loss level. The extent of the upgrade is one notch for junior notes
and one to three notches for mezzanine notes.
--COLLATERAL PERFORMANCE
Collateral performance has remained broadly stable in Greek RMBS transactions.
With few exceptions, arrears levels have remained low and stable,
with 90+ arrears on average standing at 2% of current portfolio
balance. However, the performance is distorted by loan buybacks
(see our sector comment https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF344660).
Moody's has reduced the portfolio expected loss assumption in KION
Mortgage Finance Plc and Themeleion Mortgage Finance PLC to 2%
from 3.38% of original portfolio balance and to 0.6%
from 0.74% of the original portfolio balance, respectively.
The updated expected loss assumptions correspond to approximately 8%
of the current portfolio balance in both transactions, aligning
the assumptions with market average. Both transactions have performed
broadly in line with the rest of the market to date.
The performance of Estia Mortgage Finance II PLC has continued to deteriorate
and to further diverge from market average, with cumulative defaults
increasing from 5.4% to 7% of the original portfolio
balance over the past year. Moody's has increased the portfolio
expected loss assumption in the transaction to 11.2% from
8.5% of the original pool balance.
--TITLOS PLC NOTES UPGRADED ON REDUCED SOVEREIGN RISK
Moody's upgraded the notes issued by Titlos plc to Caa1 (sf) from Caa3
(sf). These notes are backed by a swap relying on payments by the
Greek government, reflecting the Greek sovereign rating.
Moody's believes the main risk driver of this transaction is Greek sovereign
risk and, as such, the rating on the notes closely mirror
that of the Greek government.
--EPIHIRO PLC NOTES PLACED ON WATCH FOR UPGRADE ON REDUCED
SOVEREIGN RISK
Moody's has placed on watch for upgrade Class A of EPIHIRO PLC.
Class A benefits from a substantial credit enhancement of approximately
51%. During the review Moody's will assess portfolio
composition and borrower concentration.
The principal methodology used in rating Estia Mortgage Finance II PLC,
Grifonas Finance No. 1 Plc, KION Mortgage Finance Plc,
Themeleion Mortgage Finance PLC, Themeleion II Mortgage Finance
Plc, Themeleion III Mortgage Finance Plc and Themeleion IV Mortgage
Finance Plc was "Moody's Approach to Rating RMBS Using the MILAN Framework",
published in March 2014. The principal methodology used in rating
EPIHIRO PLC was "Moody's Global Approach to Rating Collateralized Loan
Obligations", published in February 2014. The principal methodology
used in rating Titlos plc was "Moody's Approach to Rating
Repackaged Securities", published in April 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of these methodologies.
Factors that would lead to an upgrade or downgrade of the ratings:
A further lowering in Moody's assessment of the sovereign risk in Greece
could lead to an additional upgrade of the ratings. Conversely,
an increase in Moody's assessment of the sovereign risk in Greece,
as well as a deterioration in the collateral performance, could
lead to a downgrade of the ratings.
--SENSITIVITY ANALYSIS
Moody's did not conduct a cash flow analysis as the main driver of today's
rating actions was its upgrade of the country ceiling for Greek debt.
LIST OF AFFECTED RATINGS
Issuer: Estia Mortgage Finance II PLC
....EUR1137.5M A Notes, Upgraded
to B1 (sf); previously on Dec 4, 2013 Upgraded to Caa1 (sf)
Issuer: Grifonas Finance No. 1 Plc
....EUR897.7M A Notes, Upgraded
to Ba3 (sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR23.8M B Notes, Upgraded
to B3 (sf); previously on Dec 4, 2013 Upgraded to Caa2 (sf)
....EUR28.5M C Notes, Upgraded
to Caa2 (sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
Issuer: KION Mortgage Finance Plc
....EUR553.8M A Notes, Upgraded
to Ba3 (sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR28.2M B Notes, Upgraded
to Caa1 (sf); previously on Dec 4, 2013 Upgraded to Caa2 (sf)
....EUR18M C Notes, Upgraded to Caa2
(sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
Issuer: Themeleion II Mortgage Finance Plc
....EUR690M A Notes, Upgraded to Ba3
(sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR37.5M B Notes, Upgraded
to B1 (sf); previously on Dec 4, 2013 Upgraded to Caa1 (sf)
....EUR22.5M C Notes, Upgraded
to B3 (sf); previously on Dec 4, 2013 Upgraded to Caa1 (sf)
Issuer: Themeleion III Mortgage Finance Plc
....EUR900M A Notes, Upgraded to Ba3
(sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR20M B Notes, Upgraded to B3 (sf);
previously on Dec 4, 2013 Upgraded to Caa1 (sf)
....EUR40M C Notes, Upgraded to Caa2
(sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
....EUR40M M Notes, Upgraded to B2 (sf);
previously on Dec 4, 2013 Upgraded to Caa1 (sf)
Issuer: Themeleion IV Mortgage Finance Plc
....EUR1352.9M A Notes, Upgraded
to Ba3 (sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR155.5M B Notes, Upgraded
to Caa2 (sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
....EUR46.6M C Notes, Affirmed
Caa3 (sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
Issuer: Themeleion Mortgage Finance PLC
....EUR693.5M A Notes, Upgraded
to Ba3 (sf); previously on Dec 4, 2013 Upgraded to B3 (sf)
....EUR32M B Notes, Upgraded to Caa1
(sf); previously on Dec 4, 2013 Upgraded to Caa2 (sf)
....EUR24.5M C Notes, Upgraded
to Caa2 (sf); previously on Dec 4, 2013 Affirmed Caa3 (sf)
Issuer: EPIHIRO PLC
....EUR1623M Class A Notes, B3 (sf)
Placed Under Review for Possible Upgrade; previously on Dec 4,
2013 Upgraded to B3 (sf)
Issuer: Titlos plc
....EUR5100M A Notes, Upgraded to Caa1
(sf); previously on Dec 4, 2013 Upgraded to Caa3 (sf)
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 did not use any models, or loss or cash flow analysis,
in its analysis.
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.
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.
Antonio Tena
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
Maria Divid
Analyst
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 upgrades 20 notes, affirms one note and places on watch for upgrade one note in nine Greek structured finance transactions
