London, 01 October 2014 -- Moody's Investors Service has today upgraded the ratings of eight notes
in three Spanish residential mortgage-backed securities (RMBS)
transactions: Madrid Residencial II, FTA, Madrid RMBS
I, FTA and Madrid RMBS II, FTA.
Today's rating action concludes the review of six notes placed on review
on 17 March 2014, following the upgrade of the Spanish sovereign
rating to Baa2 from Baa3 and the resulting increase of the local-currency
country ceiling to A1 from A3 (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_292078).
The sovereign rating upgrade reflected improvements in institutional strength
and reduced susceptibility to event risk associated with lower government
liquidity and banking sector risks.
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
Today's upgrades reflect (1) the increase in the Spanish local-currency
country ceiling to A1 and (2) sufficiency of credit enhancement in the
affected transactions; for the revised rating levels.
For Madrid Residencial II, FTA and Madrid RMBS I, FTA,
today's rating action also reflects the correction of a model input
error. In prior rating actions, the recovery rate input in
the model was inconsistent with the MILAN input, therefore the tail
of the asset loss distribution was generated incorrectly. The model
has now been adjusted, and today's rating action reflects
this change.
-- Reduced Sovereign Risk
The Spanish sovereign rating was upgraded to Baa2 in February 2014,
which resulted in an increase in the local-currency country ceiling
to A1. The Spanish country ceiling, and therefore the maximum
rating that Moody's assigns to a domestic Spanish issuer including structured
finance transactions backed by Spanish receivables, is A1 (sf).
-- Key collateral assumptions
The key collateral assumptions for Madrid Residencial II, FTA,
Madrid RMBS I, FTA and Madrid RMBS II, FTA have not been updated
as part of this review. The performance of the underlying asset
portfolios remain in line with Moody's assumptions. Moody's
also has a stable outlook (http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF373727)
for Spanish ABS and RMBS transactions.
-- Exposure to Counterparties
Moody's rating analysis also took into consideration the exposure to key
transaction counterparties. Including the roles of servicer,
account bank, and swap provider.
Today's rating action takes into account servicer commingling exposure
to Bankia, S.A for all three transactions and account bank
exposure to Banco Santander S.A. (Spain) for Madrid Residencial
II, FTA.
Moody's also assessed the exposure to Banco Bilbao Vizcaya Argentaria,
S.A. and Royal Bank of Scotland plc acting as swap counterparties
in each deal when revising ratings.
Principal Methodology:
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in March 2014.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
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) further reduction in sovereign risk, (2) performance
of the underlying collateral that is better than Moody's expected,
(3) deleveraging of the capital structure and (4) improvements in the
credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk, (2) performance of the
underlying collateral that is worse than Moody's expects, (3) deterioration
in the notes' available credit enhancement and (4) deterioration in the
credit quality of the transaction counterparties.
List of Affected Ratings:
Issuer: Madrid Residencial II, FTA
....EUR 456M Class A Notes, Upgraded
to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed Under
Review for Possible Upgrade
Issuer: MADRID RMBS I FONDO DE TITULIZACION DE ACTIVOS
....EUR 1340M Class A2 Notes, Upgraded
to A3 (sf); previously on Mar 17, 2014 Baa2 (sf) Placed Under
Review for Possible Upgrade
....EUR 70M Class B Notes, Upgraded
to Ba2 (sf); previously on Mar 17, 2014 Ba3 (sf) Placed Under
Review for Possible Upgrade
....EUR 75M Class C Notes, Upgraded
to Caa1 (sf); previously on Apr 30, 2013 Confirmed at Caa2
(sf)
Issuer: MADRID RMBS II FONDO DE TITULIZACION DE ACTIVOS
....EUR 936M Class A2 Notes, Upgraded
to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed Under
Review for Possible Upgrade
....EUR 270M Class A3 Notes, Upgraded
to A3 (sf); previously on Mar 17, 2014 Baa2 (sf) Placed Under
Review for Possible Upgrade
....EUR 63M Class B Notes, Upgraded
to Ba1 (sf); previously on Mar 17, 2014 Ba3 (sf) Placed Under
Review for Possible Upgrade
....EUR 67.5M Class C Notes,
Upgraded to Caa1 (sf); previously on Apr 30, 2013 Confirmed
at Caa2 (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.
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.
As the section on loss and cash flow analysis describes, 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 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.
Nadia Lamniai
Associate 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
Anthony Parry
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Ali Khan
Associate 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 upgrades eight notes in three Spanish RMBS Transactions: Madrid Residencial II, FTA, Madrid RMBS I, FTA and Madrid RMBS II, FTA
