Moody's has also affirmed the ratings of one Spanish ABS transaction backed by electricity tariff receivables
Madrid, January 22, 2018 -- Moody's Investors Service ("Moody's") has today upgraded
the ratings of four Spanish asset-backed securities (ABS) backed
by electricity tariff deficit (ETD) receivables. Moody's
has also affirmed the ratings of one Spanish ABS backed by ETD:
Issuer: Alectra Finance p.l.c.
....EUR1197.05M (Current outstanding
amount of EUR 356.6M) Class A Notes, Upgraded to Aa3 (sf);
previously on May 11, 2015 Upgraded to A1 (sf)
Issuer: Bliksem Funding Limited
....EUR200M (Current outstanding amount of
EUR 53.8M) Class A Notes, Upgraded to Aa3 (sf); previously
on May 11, 2015 Upgraded to A1 (sf)
Issuer: Delta SPARK Limited
....EUR1289.5M (Current outstanding
amount of EUR 517.8M) Class A Notes, Affirmed A2 (sf);
previously on May 11, 2015 Upgraded to A2 (sf)
Issuer: Rayo Finance Ireland (No.1) Limited
....EUR75M (Current outstanding amount of
EUR 17.7M) Series 1 Notes, Upgraded to Aa3 (sf); previously
on May 11, 2015 Upgraded to A1 (sf)
....EUR507.63M (Current outstanding
amount of EUR 121.7M) Series 2 Notes, Upgraded to Aa3 (sf);
previously on May 11, 2015 Upgraded to A1 (sf)
....EUR269.31M (Current outstanding
amount of EUR 62.1M) Series 3 Notes, Upgraded to Aa3 (sf);
previously on May 11, 2015 Upgraded to A1 (sf)
....EUR439.27M (Current outstanding
amount of EUR 108.2M) Series 4 Notes, Upgraded to Aa3 (sf);
previously on May 11, 2015 Upgraded to A1 (sf)
....EUR421.7M (Current outstanding
amount of EUR 135.8M) Series 5 Notes, Upgraded to Aa3 (sf);
previously on May 11, 2015 Upgraded to A1 (sf)
Issuer: Telectric 1 DAC
....EUR 359.8M (Current outstanding
amount of EUR 348M) Secured Notes due 17 March 2029, Upgraded to
Aa3 (sf); previously on Jul 4, 2017 Assigned A1 (sf)
RATINGS RATIONALE
Today's upgrade reflects the decrease in Electricity Tariff Deficit
based on data from CNMC (a Spanish regulatory body) as of 30 November
2017. The data show a definitive surplus of EUR421m as of year-end
2016, which is the third consecutive year of surpluses after a decade
of increasing deficits. In addition, CNMC's projections
estimate a surplus of EUR9.4m at the end of 2017 but it is not
a definitive figure yet. This projection should be confirmed and
revised in the course of 2018.
Outstanding cumulative electricity system debt stands at EUR23.07bn
at end of 2016 which compares with EUR25.05bn reported as of end
2015. The proportion of outstanding debt over regulated revenues
has also decreased to 132% as of end 2016 from 138% at end
of 2015.
Counterparty exposure
In its analysis, Moody's has considered the transactions' exposure
to different counterparties, especially the issuer account bank
and swap counterparties.
Delta SPARK Limited's exposure to Dexia Credit Local (Baa3/P-3)
as the swap counterparty limits the class A notes' maximum achievable
rating at A2 (sf). Dexia Credit Local provides a basis swap in
which it pays the interest on the notes as well as senior costs and expenses.
It pays one-month Euro Interbank Offered Rate (Euribor),
which resets monthly, plus 0.55% per annum in interest.
It receives the interest component of the credit rights at three-month
Euribor, which resets annually, plus 0.65% per
annum. Delta SPARK Limited waived the rating trigger breach,
which would have required the replacement of the swap counterparty and
the posting of additional collateral.
Swap counterparty exposure does not limit Moody's ratings in Bliksem Funding
Limited, Alectra Finance p.l.c. and Rayo Finance
Ireland (No.1) Limited, given that their counterparties are
rated either A1 or above, with triggers in place to post collateral
(if the counterparty's rating falls below A2) and replace the counterparty
(if the counterparty's rating falls below A3).
Telectric 1 DAC does not have any swap counterparty exposure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Moody's Global Approach
to Rating Securities Backed by Utility Cost Recovery Charges published
in June 2015. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The underlying assets' credit quality would weaken if any electricity
reforms weaken the terms of the tariff deficit receivables, new
deficits maintain or increase the system's debt level or if the Spanish
government's creditworthiness weakens.
The assets' credit quality would benefit from a stronger-than-expected
macroeconomic environment in Spain, resulting in an improvement
in the government's creditworthiness. They would also benefit from
a positive trend in ETDs reduction, in line with 2016's performance.
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
Mehdi Ababou
VP - Senior Credit Officer
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
