Madrid, November 03, 2014 -- Moody's Investors Service has today upgraded to Ba2 (sf) and Ba3 (sf),
respectively, the ratings on the Class A and B notes issued by FTA
SANTANDER PUBLICO 1.
Today's rating action concludes the review of the two 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.
The transaction is an asset-backed security backed by loans granted
by Banco Santander S.A. (Spain) (Baa1/P-2) to Spanish
municipalities.
RATINGS RATIONALE
Today's rating action reflects (1) an increase in the portfolio credit
quality following the improvement in the Spanish government's credit
quality as reflected in the upgrade and (2) sufficiency of credit enhancement
in the affected transaction which has increased over the last 12 months.
-- IMPROVEMENT IN PORTFOLIO CREDIT QUALITY
Moody's has assessed the current credit quality of the portfolio as being
equivalent to a Ba1 rating, which compares favourably with the Ba3
average credit quality previously assessed. The rating agency derives
this average credit quality from recently updated credit estimates (for
the top eight exposures accounting for 43% of the portfolio) and
Q scores for the remaining part of the portfolio. Rated entities
represent 1.8% of the current portfolio.
As credit estimates and Q scores do not carry credit indicators,
such as ratings reviews and outlooks, Moody's performed several
stress tests. In the rating agency's central scenario, it
downgraded by two notches the credit estimates of the four largest borrowers
with individual exposures in excess of 3% individually and 30%
collectively of the portfolio. This resulted in an average adjusted
credit quality of Ba2 assuming a 1.9 year weighted average life
(corresponding to a 3% default probability).
Moreover, the sub-sovereign profile of the bulk of the debtors,
all of whom are domiciled in Spain, leads to a 100% correlation
assumption in Moody's model. Moody's has decreased the 45%
fixed recovery rate on defaulted assets to 35% based on low recovery
levels observed on defaulted loans.
Moody's also took into consideration the fact that the borrower concentration
in the portfolio has increased significantly with an effective number
of 29 based on loan-by-loan information as of October 2014
down from 44 in February 2013. The top 16 exposures now account
for 60% of the outstanding pool. Among the largest six borrowers,
which collectively account for almost 40% of the volume of loans
of the pool, are (1) one region, which represents 10.6%
of the pool volume; (2) two provinces representing 7.5%
and 4.6%, respectively; and (3) three city councils,
which represent 5.7%, 5.7% and 3.6%,
respectively.
In the application of the "Updated Approach to the Usage of Credit Estimates
in Rated Transactions" (October 2009), Moody's has performed
a number of sensitivity analyses, including "jump-to-default"
tests. When downgrading either of the two senior exposures to Caa2,
the rating agency concluded that the model output for the senior tranche
would not be affected compared to the central scenario, thus indicating
the resiliency of its rating to standard stress.
-- STRUCTURE
This transaction is a static securitisation of a portfolio of loans to
Spanish public entities, which closed in December 2004. The
closing loan portfolio of EUR1,850 million has substantially amortised
to its current size of EUR153 million. The Class A and B notes
benefit from credit enhancement of approximately 15% and 7%,
respectively, including a EUR10.8 million reserve fund.
The reserve fund has amortised down to its minimum level on the back of
the transaction's good performance to date, but suffered consecutive
draws on recent interest payment dates.
-- PERFORMANCE
The performance of FONDO DE TITULIZACIÓN DE ACTIVOS SANTANDER PUBLICO
1 has historically been very good in terms of 90+ day delinquencies
and defaults (delinquency levels have never exceeded 2%),
and there are no loans in 90+ day delinquencies as of September 2014.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was "Moody's Global Approach
to Rating Collateralized Loan Obligations", published in February
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 rating:
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: FTA SANTANDER PUBLICO 1
....EUR1813M A Notes, Upgraded to Ba2
(sf); previously on Mar 17, 2014 Ba3 (sf) Placed Under Review
for Possible Upgrade
....EUR37M B Notes, Upgraded to Ba3
(sf); previously on Mar 17, 2014 B2 (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 this transaction
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.
Antonio Tena
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
Carole Gintz
Senior Vice President/Manager
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 two classes of FONDO DE TITULIZACIÓN DE ACTIVOS SANTANDER PUBLICO 1 ABS notes
