Madrid, February 25, 2015 -- Moody's Investors Service has today upgraded the ratings of six notes
and downgraded the ratings of six notes in the four Spanish residential
mortgage-backed securities (RMBS) transactions: HIPOCAT 6,
FTA; HIPOCAT 10, FTA; HIPOCAT 11, FTA and HIPOCAT
17, FTA.
Today's rating action concludes the review of eleven notes initiated on
23 January 2015, following the upgrade of the Spanish country ceiling
to Aa2 from A1 (http://www.moodys.com/viewresearchdoc.aspx?docid=PR_316959).
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
Today's rating upgrades reflect (1) the increase in the Spanish local-currency
country ceiling to Aa2 and (2) sufficiency of credit enhancement in the
affected transactions for the revised rating levels.
Today's rating downgrades reflect that the current credit enhancement
for the notes is not sufficient to mitigate the increased expected loss
assumptions.
-- Reduced Sovereign Risk
The country ceilings reflect a range of risks that issuers in any jurisdiction
are exposed to, including economic, legal and political risks.
On 20 January 2015, Moody's announced a six-notch uplift
between a government bond rating and its country risk ceiling for Spain.
As a result, the maximum achievable rating for covered bonds and
structured finance transactions was increased to Aa2 from A1 for Spain.
-- Key collateral assumptions
Moody's has reassessed its lifetime loss expectation taking into account
the collateral performance of the transactions to date. The assumption
of 1.00% and 5.10% over original balance has
not been updated in Hipocat 6, FTA and Hipocat 17, FTA,
respectively, as the performance of the underlying asset portfolios
remain in line with Moody's assumptions. However, in Hipocat
10, FTA and Hipocat 11, FTA the Expected Loss assumption as
a percentage over original balance has been increased to 10.70%
from 9.90% and to 15.38% from 14.60%
due to a worse performance of the underlying assets than expected.
For Hipocat 10, FTA, the cumulative defaults have increased
to 15.67% from 12.07% over original balance
compared to January 2014. For Hipocat 11, FTA, the
cumulative defaults have increased to 22.06% from 18.57%
over original balance over the same period.
The MILAN CE has not been updated as part of this review for any of the
four transactions reflecting that updated portfolio characteristics remain
in line with Moody's assumptions.
Hipocat 17, FTA: A sub-portfolio of loans to the amount
of EUR 143.6 million, approximately 12.85%
of the portfolio balance at closing, was repurchased from the asset
pool on 16 July 2014. The repurchased loans consisted of a mixture
of performing loans, delinquent loans and defaulted loans.
The principal proceeds from the sale were allocated to partially repay
the senior notes. In today's rating action, Moody's has given
credit to the improvement in credit enhancement levels. Moody's,
forward looking, collateral assumptions have not been updated as
a result of the removal of the loans. The repurchased loans in
default have already been written off via the PDL mechanism and reflected
in Moody's cashflow analysis. The repurchase of delinquent loans
improves the overall delinquency status of the pool, however Moody's
expects a return to previous levels over the coming quarters.
-- 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 the servicer commingling exposure
to Catalunya Banc, S.A. (B3, Review for Upgrade/NP)
for the four transactions. Moody's also assessed when revising
ratings the exposure to CECABANK S.A. (Ba3/NP), JPMorgan
Chase Bank, N.A., London Branch (Aa3/(P)P-1)
and Catalunya Banc, S.A. (B3, Review for Upgrade/NP)
acting as swap counterparties in the transactions as well as the exposure
to Banco Santander S.A. (Spain) (Baa1/P-2) acting
as issuer account bank in the Hipocat 17, FTA transaction.
--Principal Methodology
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in January 2015.
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: HIPOCAT 6, FTA
....EUR787.6M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under
Review for Possible Upgrade
....EUR15.7M B Notes, Upgraded
to A2 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under
Review for Possible Upgrade
....EUR34M C Notes, Upgraded to Baa2
(sf); previously on Jan 23, 2015 Ba2 (sf) Placed Under Review
for Possible Upgrade
Issuer: HIPOCAT 10, FTA
....EUR733.4M A2 Notes, Downgraded
to Ba3 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR300M A3 Notes, Downgraded to
Ba3 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR54.8M B Notes, Downgraded
to Caa3 (sf); previously on Jan 23, 2015 Caa1 (sf) Placed Under
Review for Possible Downgrade
....EUR51.8M C Notes, Downgraded
to C (sf); previously on Dec 18, 2009 Downgraded to Ca (sf)
Issuer: HIPOCAT 11, FTA
....EUR1083.2M A2 Notes, Downgraded
to B2 (sf); previously on Jan 23, 2015 B1 (sf) Placed Under
Review for Possible Downgrade
....EUR200M A3 Notes, Downgraded to
B2 (sf); previously on Jan 23, 2015 B1 (sf) Placed Under Review
for Possible Downgrade
Issuer: HIPOCAT 17, FTA
....EUR1070.8M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under
Review for Possible Upgrade
....EUR4.4M B Notes, Upgraded
to Baa3 (sf); previously on Jan 23, 2015 Ba3 (sf) Placed Under
Review for Possible Upgrade
....EUR24.8M C Notes, Upgraded
to Caa2 (sf); previously on Jan 23, 2015 Caa3 (sf) Placed Under
Review for Possible Upgrade
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.
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.
Maria Turbica Manrique
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
Gaby Helena Trinkaus
AVP - Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Masako Oshima
Senior Vice President
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 the rating of six notes and downgrades the rating of six notes in four Hipocat RMBS transactions
