EUR10 million of rated securities affected
Frankfurt am Main, February 24, 2011 -- Moody's Investors Service has today upgraded the rating on the long-term
credit rating of the F2 note issued by AyT FTPYME I, FTA:
....EUR60.2 million F2 bond,
upgraded to Aaa (sf); previously on 20 Dec 2003, assigned Aa1(sf)
definitive rating
RATINGS RATIONALE
Today's upgrade to Aaa (sf) of the F2 notes issued by AyT FTPYME I,
FTA, takes into consideration the significant increase in credit
enhancement under the senior notes. The credit enhancement supporting
both the F2 and T2 tranches, which rank pari passu, represents
118% of the notes' amount and includes a reserve fund of
EUR66.4 million, which fully covers the F2 and T2 notes balance
of EUR50.3 million. The class T2 tranche is guaranteed by
the Kingdom of Spain and is rated Aaa (sf).
Moody's analysis also took into account (a) the credit quality of the
underlying portfolio of SME loans, on the basis of which the rating
agency determined: (i) its cumulative default and recovery rate;
(ii) its volatility assumption; and (b) the transaction structure,
as assessed under Moody's cash flow analysis. The expected cumulative
default rate and volatility assumption are the two key parameters the
rating agency uses to calibrate its default distribution curve,
which is in turn included in the cash flow model used to rate European
ABS transactions.
Performance
Historically, this transaction has performed slightly worse than
the Spanish SME delinquency index published by Moody's ("Spanish SME December
2010 Indices", February 2010). As of January 2011,
90- to 360-day delinquencies represented 2.7%
of current balance compared with an index average of 1.7%.
Since closing in 2003, cumulative write-offs for the transaction
have stood at 0.66% of the original balance.
Key revised assumptions: Cumulative default and volatility
Moody's has reassessed its lifetime default expectation for AyT FTPYME
I's collateral pool, not only factoring in the weak collateral
performance to date, but also taking into account any likely performance
deterioration of the pool in the current down cycle. In doing so,
the rating agency took into account the transaction's industry and regional
concentration, including its high exposure to the "Beverage,
Food and Tobacco" sector (49% of the pool) and moderate exposure
to real estate (15.4%), as well as to the Almeria
region (47% of the pool).
Moody's assumes a default probability for SME debtors operating in the
real estate sector to be equivalent to a rating in the single-B
range, which takes into account the outlook of the real estate sector.
The rating agency also assumes a default probability for non-real-estate
debtors in the low Ba range. At the same time, Moody's estimates
the remaining weighted average life of the portfolio to be 4.5
years. Consequently, these revised assumptions have translated
into a rise in the cumulative mean default assumption for the current
portfolio equal to 16.2% of the current portfolio balance.
This rise corresponds to an equivalent rating of B1/B2. This implies
a revised cumulative mean default calculation for the entire transaction
since closing equal to 9.8% of the original portfolio balance
(assuming cumulative defaults on a 90-day basis of 8% of
the original balance so far), compared with a 5% initial
default assumption at closing.
Given the relatively low granularity of the pool (effective number of
592), Moody's used a Monte Carlo simulation to derive the
gross default distribution. The coefficient of variation has been
adjusted to 45%, compared with 50% as of closing in
December 2003.
Moody's increased the average recovery-rate assumption to
35% (stochastic recovery rate), compared with 30%
assumed at closing. The rating agency also lowered the constant
prepayment rate (CPR) assumption to 5% instead of 10% at
closing. In addition, Moody's performed sensitivity tests
in the 0%-10% range.
The principal methodologies used in this rating were Refining the ABS
SME Approach: Moody's Probability of Defaults Assumptions in the
Rating Analysis of Granular Small and Mid Sized Enterprise Portfolios
in EMEA, published in March 2009 and Moody's Approach to Rating
Granular SME Transactions in Europe, Middle East and Africa,
published in June 2007.
Moody's did not receive or take into account a third party due diligence
report on the underlying assets or financial instruments related to the
monitoring of this transaction in the past six months.
Moody's used its excel based cash flow model, Moody's ABSROM™,
as part of its quantitative analysis of the transaction. Moody's
ABSROM™ model enables users to model various features of a standard
European ABS transaction including: (i) the specifics of the default
distribution of the assets, their portfolio amortization profile,
yield or recoveries; and (ii) the specific priority of payments,
triggers, swaps and reserve funds on the liability side of the ABS
structure. Moody's ABSROM™ User Guide is available on Moody's
website and covers the model's functionality as well as providing
a comprehensive index of the user inputs and outputs. MOODY'S CDOROMv2.8™
was used to estimate the default distribution.
Moody's analysed various sensitivities of cumulative default rates to
test the robustness of its revised rating. For instance,
the rating agency observed that the quantitative/model-indicated
rating outcome for classes F2 and T2 would remain consistent with the
revised rating if the mean default rate were to increase by 25 %
at 20.2%. In addition, Moody's tested
a reduction of the reserve fund, which could occur if delinquency
levels fall below 1% (compared with 2.7% as of the
last reporting date). In that case, the model outcome remained
consistent with the rating of the notes, including the A1 rating
on class B.
Operational risk
The transaction is serviced by 13 Spanish banks, of which nine are
not rated by Moody's (representing approximately 40% of the
portfolio balance). Given the high level of the reserve fund,
the senior ratings are well insulated against servicer disruption risk.
The Fondo's management company ("gestora"), AyT,
acting as the cash manager, has indicated to Moody's that
should one of the servicers cease to provide the relevant information
on the portfolio of loans they are servicing, AyT would continue
to apply the waterfall. It would accomplish this by using available
funds for which the source (principal, interest, other monies
) can be identified (including the reserve fund), so as to make
timely payment of interest under the notes. So even in case one
or several of the weaker servicers in the transaction does not provide
on time the servicer report with all details, interest payments
on the notes will be made in a timely manner. So the high reserve
fund levels and the waterfall mechanics provide good mitigants in this
transaction against potential operational risks.
Transaction
AyT FTPYME I, FTA is a securitisation fund, which purchased
a pool of loans granted to SMEs originated by six savings banks and seven
credit cooperatives in December 2003. In January 2011, the
portfolio consisted of 1,453 loans. Most of the loans were
originated between 1999 and 2003.
Moody's ratings address the expected loss posed to investors by the legal
final maturity of the notes. The rating agency's ratings
address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed, but may have
a significant effect on yield to investors.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Frankfurt am Main
Ludovic Thebault
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades to Aaa(sf) F2 notes issued by AyT FTPYME I (Spanish SME ABS)
