Madrid, April 17, 2018 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
22 Spanish covered bond programmes and placed another on review for upgrade.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF470562
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF470562
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:
Today's rating action on various Spanish covered bonds programmes follows
Moody's upgrade of the Government of Spain's ("Spain") local-currency
bond ceiling to Aa1 from Aa2 which in turn follows the upgrade of the
Government of Spain's issuer and bond ratings to Baa1 with a stable outlook
from Baa2. As a result of this upgrade, the Spanish covered
bonds' ratings are now capped at Spain's local currency bond ceiling
of Aa1.
For full details, please refer to the sovereign press release:
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_381868.
Following the upgrade of Spain's sovereign rating, some Counterparty
Risk (CR) Assessments of covered bond issuers were also upgraded (see
" Moody's takes rating actions on Spanish banks", published on 17
April 2018). Full details of the banks' ratings upgrades can be
found at http://www.moodys.com/viewresearchdoc.aspx?docid=PR_382149.
For those covered bonds with a Timely Payment Indicator (TPI) of Probable
and an issuer CR assessment at Baa1 (cr) or above, the Spanish country
bond ceiling constrains the ratings at Aa1. For those covered bonds
with an Issuer's CR assessment at Baa2 (cr), both the country
ceiling and TPI framework constrain the ratings at Aa1.
For BBVA, S.A. - Export Finance Covered Bond,
the TPI is Improbable. As a result, both the Spanish country
ceiling and TPI framework constrain the rating at the Aa1 level.
All covered bond ratings upgraded to Aa1 have over-collateralisation
(OC) consistent with that rating level.
For Caixabank, S.A. - Public Sector Covered
Bonds, Moody's has placed the Aa2 rating on review for upgrade,
reflecting the potential rating upgrade if the issuer increases the OC
level in the programme to a level consistent with that of a Aa1 rating.
During the review process, Moody's will assess the willingness
and capacity of the issuer to increase and maintain that OC level over
the time.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step process:
an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL) to determine
a rating based on the expected loss on the bond. COBOL determines
expected loss as: (1) a function of the probability that the issuer
will cease making payments under the covered bonds (a CB anchor event);
and (2) the stressed losses on the cover pool assets following a CB anchor
event.
The CB anchor for all the Spanish covered bonds is the CR assessment plus
one notch. The CR assessment reflects an issuer's ability to avoid
defaulting on certain senior bank operating obligations and contractual
commitments, including covered bonds.
The cover pool losses are an estimate of the losses Moody's currently
models following a CB anchor event. Moody's splits cover pool losses
between market risk and collateral risk. Market risk measures losses
stemming from refinancing risk and risks related to interest-rate
and currency mismatches (these losses may also include certain legal risks).
Collateral risk is derived from the collateral score, which measures
losses resulting directly from the cover pool assets' credit quality.
Please click the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF470562
for detailed information on over-collateralisation, expected
loss and TPI.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Moody's Global Covered Bonds
Monitoring Overview", published quarterly. All numbers in
List of Affected Credit Ratings are based on Moody's most recent modelling
(based on data, as of the date of the most recent Performance Overviews).
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which measures the likelihood of timely payments to covered bondholders
following a CB anchor event. The TPI framework limits the covered
bond rating to a certain number of notches above the CB anchor.
Factors that would lead to an upgrade or downgrade of the ratings:
The CB anchor is the main determinant of a covered bond programme's rating
robustness. A change in the level of the CB anchor could lead to
an upgrade or downgrade of the covered bonds. The TPI Leeway measures
the number of notches by which Moody's might lower the CB anchor before
the rating agency downgrades the covered bonds because of TPI framework
constraints.
A multiple-notch downgrade of the covered bonds might occur in
certain circumstances, such as: (1) a country ceiling or sovereign
downgrade capping a covered bond rating or negatively affecting the CB
Anchor and the TPI; (2) a multiple-notch downgrade of the
CB Anchor; or (3) a material reduction of the value of the cover
pool.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating Covered Bonds" published in December 2016. Please see
the Rating Methodologies page on www.moodys.com for a copy
of this methodology.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF470562
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:
- Releasing Office
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 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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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 rating 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.
Miguel Lopez Patron
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
Client Service: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
