London, 28 January 2016 -- Moody's Investors Service has today upgraded the ratings of three notes
and affirmed the ratings of four notes in two Portuguese residential mortgage-backed
securities (RMBS) transactions: Atlantes Mortgage No.1 Plc
(Atlantes) and Azor Mortgages Public Limited Company (Azor). The
rating action reflects the upgrade of the Servicer's long term deposit
rating and Counterparty Risk assessment "CR assessment" to
Baa3 and Baa3(cr), respectively, and the increased levels
of credit enhancement for the affected notes.
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
The rating action is prompted change of servicer as a consequence of Banco
Santander Totta S.A. (BST; Baa3(cr)) acquisition of
BANIF-Banco Internacional do Funchal, S.A.
(Banif; B3(cr), continued review for uncertain) operations
related to the above mentioned deals.
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_341756.
Moreover this action also considers deal deleveraging resulting in an
increase in credit enhancement for the affected tranches.
Increase in Available Credit Enhancement
Sequential amortization and non-amortising reserve funds led to
the increase in the credit enhancement available in these transactions.
For instance, the credit enhancement for Atlantes most senior tranche
affected by today's rating action increased from 43.63%
to 46.95% since the last rating action, whereas,
Azor's most senior tranche affected by today's rating action
increased from 64.16% to 72.51% since the
last rating action.
Counterparty Exposure
Today's rating actions 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 note payments, in case of
servicer default, using the CR Assessment as a reference point for
servicers. The rating of the upgraded notes are not constrained
by operational risk. As a result, Moody's upgraded
the below tranches.
Moody's matches banks' exposure in structured finance transactions to
the CR Assessment for commingling risk, and to the bank deposit
rating when analyzing set-off risk. Moody's has introduced
a recovery rate assumption of 45% for both exposures.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in January 2015.
The analysis undertaken by Moody's at the initial assignment of these
ratings for RMBS securities may focus on aspects that become less relevant
or typically remain unchanged during the surveillance stage. Please
see Moody's Approach to Rating RMBS Using the MILAN Framework for further
information on Moody's analysis at the initial rating assignment and the
on-going surveillance in RMBS.
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 and
(3) improvements in the credit quality of the transaction counterparties
and (4) a decrease in sovereign risk.
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 expected, (3) deterioration
in the notes' available credit enhancement and (4) deterioration in the
credit quality of the transaction counterparties.
LIST OF AFFECTED RATINGS:
Issuer: Atlantes Mortgages No.1 Plc
....EUR462.5M A Notes, Affirmed
A1 (sf); previously on Jul 15, 2015 Affirmed A1 (sf)
....EUR22.5M B Notes, Affirmed
A1 (sf); previously on Jul 15, 2015 Upgraded to A1 (sf)
....EUR12.5M C Notes, Upgraded
to Baa2 (sf); previously on Jul 15, 2015 Upgraded to Ba2 (sf)
....EUR2.5M D Notes, Upgraded
to B2 (sf); previously on Jul 15, 2015 Affirmed B3 (sf)
Issuer: Azor Mortgages Public Limited Company
....EUR253M A Notes, Affirmed A1 (sf);
previously on Jan 23, 2015 Upgraded to A1 (sf)
....EUR19M B Notes, Affirmed A1 (sf);
previously on Jan 23, 2015 Upgraded to A1 (sf)
....EUR9M C Notes, Upgraded to Baa1
(sf); previously on Jan 23, 2015 Affirmed Ba1 (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.
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.
Nicolas Odella
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
Masako Oshima
Senior Vice President/Manager
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 three notes and affirms four notes in two Portuguese RMBS transactions