Actions follow the raising of the Spanish country ceiling
Madrid, April 24, 2018 -- Moody's Investors Service ("Moody's") has today upgraded the ratings of
29 tranches and placed on review for upgrade 33 tranches in 29 Spanish
ABS-SME deals.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF470689
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_SF470689
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:
• Key Rationale for Action / review placement and Constraining Factor(s)
• Principal Methodologies
Today's rating action on various Spanish ABS-SME transactions 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.
Following the raising of the Spanish ceiling, Moody's has
upgraded 26 tranches to Aa1 from Aa2 as a direct reflection of the new
Spanish country ceiling. Furthermore, 33 tranches were put
on review for upgrade in order to consider both the impact from the reduced
country risk as well as the potential deleveraging of such notes.
Finally, there were 3 tranches upgraded to Aa3 from A1 in line with
the maximum rating achievable for such tranches due to account bank risk.
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 Spanish
Banks' Long Term deposit bank ratings 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.
Counterparty exposure
Today's rating action took into consideration the notes' exposure to relevant
counterparties, such as servicer, account banks or swap providers.
Moody's considered how the liquidity available in the transactions and
other mitigants support continuity of notes payments, in case of
servicer default, using the CR Assessment as a reference point for
servicers.
Moody's also matches banks' exposure in structured finance transactions
to the CR Assessment for commingling risk, with a recovery rate
assumption of 45%.
Moody's also assessed the default probability of the account bank providers
by referencing the bank's deposit rating.
Moody's assessed the exposure to the swap counterparties. Moody's
considered the risks of additional losses on the notes if they were to
become unhedged following a swap counterparty default by using CR Assessment
as reference point for swap counterparties.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings
include: (1) performance of the underlying collateral that is better
than Moody's expected, (2) deleveraging of the capital structure,
(3) improvements in the credit quality of the transaction counterparties,
and (4) reduction in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include: (1) performance of the underlying collateral that is worse
than Moody's expected, (2) deterioration in the notes' available
credit enhancement, (3) deterioration in the credit quality of the
transaction counterparties, and (4) an increase in sovereign risk.
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.
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.
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 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.
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.
Angel Jimenez
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
Ian Perrin
Associate Managing Director
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
