(The following statement was released by the rating agency)
Nov 19 -
-- We have reviewed the performance of Madrid Ftpyme I, performing our credit and cash flow analysis using the latest available trustee reports.
-- We have also reviewed counterparty and sovereign risk in the transaction, and have concluded that the rating on the notes is constrained under our 2012 counterparty criteria, based on our review of the support provided by the account bank, Banco Santander (BBB/Negative/A-2).
-- As a result, we have lowered to 'A (sf)' from 'AA- (sf)' our rating on the class A2 (G) notes.
Standard & Poor's Ratings Services today lowered to 'A (sf)' from 'AA- (sf)' its credit rating on Madrid Ftpyme I, Fondo de Titulizacion de Activos' class A2 (G) notes.
Today's rating action follows our assessment of the transaction's performance since our previous review in 2011 (see "Related Criteria and Research"). We have applied our criteria for rating European SME securitizations, our nonsovereign ratings criteria, and our 2012 counterparty criteria (see "Update To the Criteria For Rating European SME Securitizations," published on Jan. 6, 2009, "Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions," published on June 14, 2011, and "Counterparty Risk Framework Methodology And Assumptions," published on May 31, 2012).
Our 2012 counterparty criteria state that bank account providers that provide "limited" support are required to be adequately rated (absent other mitigants) in order to achieve the maximum potential rating on a supported security (see table 1 in "Counterparty Risk Framework Methodology And Assumptions"). This includes counterparties that commit to replace themselves within the remedy period as outlined by our criteria.
Banco Santander (BBB/Negative/A-2) currently acts as bank account provider for this transaction. Following our analysis of the transaction documents and the application of our 2012 counterparty criteria, we have concluded that the rating on the class A2 (G) notes is constrained by the long-term rating on Banco Santander as bank account provider in this transaction. Under our criteria, the maximum potential rating achievable on the class A2 (G) notes is 'A (sf)' (see table 1 in "Counterparty Risk Framework Methodology And Assumptions"). We have therefore lowered to 'A (sf)' from 'AA- (sf)' our rating on the class A2 (G) notes.
Part of our performance review of the transaction also included a credit and cash flow analysis. We subjected the transaction's capital structure to our cash flow analysis, based on the methodology and assumptions as outlined in our European SMEs criteria. We used the reported portfolio balances that we considered to be performing and the current weighted-average collateral pool margins. The transaction also benefits from a reserve fund, which was fully funded at issuance, representing around 22% of the portfolio balance, up from 14.20% at closing. The notional balance of the reserve fund remains unchanged.
Our analysis shows that currently 59% of the outstanding loans since origination remain in the pool. The transaction has continued to amortize, whereby the deleveraging of the class A2 (G) notes has led to higher subordination levels. At the same time, however, the amortization of the underlying pool has also meant an increase in obligor concentration since closing. Specifically, according to our analysis:
-- The top 10 obligors now represent 9.67% of the portfolio balance, up from 8.33% at closing;
-- The top 20 obligors represent 14.95%, up from 12.53% at closing:
-- The top 30 obligors represent 18.96%, up from 15.81% at closing; and
-- The top 40 obligors represent 22.11%, up from 18.49% at closing.
We factored into our analysis the increase in obligor concentration and concluded that the portfolio remains sufficiently diverse to the extent that our rating on the class A2 (G) notes was not affected.
Although our credit and cash flow analysis shows that the class A2 (G) notes are able to attain ratings higher than their current 'AA- (sf)' rating, the notes are not able to attain ratings higher than 'AA- (sf)' as a result of the application of our nonsovereign ratings criteria. Under these criteria, the highest rating we would assign to a structured finance transaction is six notches above the investment-grade rating on the country in which the securitized assets are located (Kingdom of Spain; BBB-/Negative/A-3). However, we have today downgraded these notes due to the application of our 2012 counterparty criteria, which means that the maximum rating on the notes is 'A (sf)'.
RELATED CRITERIA AND RESEARCH
-- Counterparty Risk Framework Methodology And Assumptions, May 31, 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, 2011
-- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, June 14, 2011
-- Ratings List Resolving European Structured Finance Counterparty CreditWatch Placements-June 14, 2011 Review, June 14, 2011
-- Principles of Credit Ratings, Feb. 16, 2011
-- Update To The Criteria For Rating European SME Securitizations, Jan. 6, 2009