TEXT-S&P puts rtgs in GC SABADELL 1, IM Sabadell RMBS 2 on CW neg

Dec 27 -

OVERVIEW

-- On Oct. 15, 2012, we lowered our long-term ratings on Banco de Sabadell and Banco Santander --counterparties for GC SABADELL 1 and IM Sabadell RMBS 2--following our Oct. 10 lowering of our sovereign ratings on Spain.

-- Since the downgrades, remedy actions were taken on the bank account provider and paying agents for GC SABADELL 1 and IM Sabadell RMBS 2 in October and December, respectively.

-- As remedy actions have not been taken for the swap provider, today, we have placed on CreditWatch negative our ratings on all classes of notes in GC SABADELL 1 and IM Sabadell RMBS 2 for counterparty reasons.

-- Both transactions securitize portfolios of mortgage loans granted to individuals located in Spain. Banco de Sabadell originated both transactions.

Standard & Poor's Ratings Services today placed on CreditWatch negative its credit ratings on all classes of notes issued by GC SABADELL 1, Fondo de Titulizacion Hipotecario and IM Sabadell RMBS 2, Fondo de Titulizacion de Activos (see list below).

On Oct. 15, 2012, we lowered our long-term ratings on Banco de Sabadell S.A. (BB/Negative/B) and Banco Santander S.A. (BBB/Negative/A-2) following our Oct. 10 lowering of our sovereign ratings on the Kingdom of Spain (see "Various Rating Actions On Spanish Financial Institutions Following Sovereign Downgrade," and "Spain Ratings Lowered To 'BBB-/A-3' On Mounting Economic And Political Risks; Outlook Negative").

GC SABADELL 1

Banco Santander was previously the bank account provider and paying agent for GC SABADELL 1. Following our Oct. 15 downgrade, Banco Santander became ineligible to act as bank account provider and paying agent due to the downgrade language contained in the documentation, that states that the eligible counterparty must have a 'A-1' short-term rating. Barclays Bank PLC (A+/Negative/A-1) has now replaced Banco Santander as an eligible bank account provider and paying agent for the transaction.

Banco de Sabadell is the swap provider for GC SABADELL 1. However, it is no longer an eligible swap counterparty because the swap documentation states that the swap counterparty must be replaced if its short-term rating falls below 'A-3'. In accordance with the documentation, and as Banco de Sabadell's short-term rating is now 'B', a replacement swap provider must be found.

IM SABADELL RMBS 2

Banco Santander is the bank account provider and paying agent for IM Sabadell RMBS 2. Following our Oct. 15 downgrade, Banco Santander became ineligible to act as bank account provider and paying agent due to the downgrade language contained in the documentation, that states that the eligible counterparty must have an 'A-1' short-term rating.

The bank account documentation has since been amended to comply with our 2012 counterparty criteria, (see "Counterparty Risk Framework Methodology And Assumptions," published on Nov. 29, 2012), making Banco Santander an eligible counterparty. The new downgrade language states that if the bank account provider's long-term rating falls below 'BBB-', it should either be replaced or guaranteed by an eligible counterparty within 60 calendar days. In accordance with the new downgrade language, the maximum achievable rating in this transaction is 'A- (sf)'.

Banco de Sabadell is the swap provider for IM Sabadell RMBS 2. However, it is no longer an eligible swap counterparty because the swap documentation states that the swap counterparty must be replaced if its short-term rating falls below 'A-3'. In accordance with the documentation, and as Banco de Sabadell's short-term rating is now 'B', a replacement swap provider must be found.

CREDITWATCH PLACEMENTS

We have today placed all of our ratings in both transactions on CreditWatch negative because remedy actions (either to find a guarantor or to find a replacement) have not been taken during the remedy period defined in the swap contracts.

We will conduct further analysis to determine how much support these transactions gain from the swap contract. This analysis could have a negative effect on our ratings for some of the affected tranches. We will also consider any replacements and potential documentation amendments in our analysis.

GC SABADELL I and IM Sabadell RMBS 2 are two residential mortgage-backed securities (RMBS) transactions issued by Banco de Sabadell. Both securitized portfolios comprise mortgage loans granted to individuals located in Spain.

RELATED CRITERIA AND RESEARCH

Related Criteria

-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012

-- Principles Of Credit Ratings, Feb. 16, 2011

-- Methodology: Credit Stability Criteria, May 3, 2010

Related Research

-- Banco de Sabadell Affirmed At 'BB/B' Despite Spain's Rising Economic Risk; Outlook Negative, Nov. 23, 2012

-- S&PCORRECT: Various Rating Actions On Spanish Banks Due To Rising Economic Risks, Nov. 23, 2012

-- Various Rating Actions On Spanish Financial Institutions Following Sovereign Downgrade, Oct. 15, 2012

-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012

-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2012

-- Spanish RMBS Index Reports, published quarterly

RATINGS LIST

Class Rating

To From

RATINGS PLACED ON CREDITWATCH NEGATIVE

GC SABADELL 1, Fondo de Titulizacion Hipotecario

EUR1.2 Billion Mortgage-Backed Floating-Rate Notes

A2 A- (sf)/Watch Neg A- (sf)

B A- (sf)/Watch Neg A- (sf)

C BBB (sf)/Watch Neg BBB (sf)

IM Sabadell RMBS 2, Fondo de Titulizacion de Activos

EUR1.4 Billion Residential Mortgage-Backed Floating-Rate Notes

A A- (sf)/Watch Neg A- (sf)

B A- (sf)/Watch Neg A- (sf)

C BBB (sf)/Watch Neg BBB (sf)