Dec 5 - Fitch Ratings has affirmed four and downgraded two tranches of AyT
Caja Murcia (Murcia) I and II, a Spanish RMBS series. The agency has also
removed six tranches from Rating Watch Negative (RWN). A full list of rating
actions is at the end of this commentary.
The downgrades reflect Fitch's concern with the thin levels of credit
enhancement available for the junior notes whilst the removal of the RWN is due
to Fitch receiving loan modification data which has offset previous concerns
over the credit profile of the underlying assets in the portfolio.
The notes were placed on RWN in September 2012 due to the concerns over the
extent of possible originator support. Despite the tough macroeconomic
environment within Spain, the assets within these portfolios continued to
perform well beyond Fitch's expectations. The agency had concerns that certain
arrear management servicing strategies were being implemented or that the
servicer had been resorting to loan modifications that would have led to a
reclassification of assets to performing.
As of October 2012, Murcia I had no reported defaults since close in December
2005, while Murcia II reported a single default with a subsequent 100% recovery
since October 2006.
The agency was provided with loan by loan level information involving borrowers
that had been subject to loan modifications. The information shows that less
than 2% of borrowers as a percentage of initial balance have been subject to
initial modifications of original terms and conditions, i.e. reduction of
margins and/or maturity extensions. This percentage is well below the limits
allowed by the transaction documentation.
The agency still believes that the originator has been offering financial
support to borrowers via refinancing. This view is formed based on the fact that
only one loan had been recognised as defaulted to date across the two
Given the current macroeconomic environment and the tightening in liquidity on
the market, in its analysis of the two transactions, Fitch did not give any
credit to the originator continuing this practice and has assumed its standard
default and recovery assumptions.
Performance over the past 12 months from an arrears perspective has begun to
deteriorate in both transactions in line with the trend seen in other Spanish
RMBS transactions rated by Fitch. The portion of loans in arrears by more than
three months is at 1.4% and 0.1% of the current outstanding balance in Murcia I
and II respectively compared to 0.8% and 0.03% 12 months ago.
With the continued adverse economic situation in Spain set to continue, Fitch
believes that the credit enhancement for the junior notes is insufficient to
withstand the agency's 'BBBsf' stresses. The downgrade of the class C notes for
both Murcia I and II and the Negative Outlook across the structure reflect these
The rating actions are as follows:
AyT Caja Murcia Hipotecario I, FTA:
Class A (ISIN ES0312282009): affirmed at 'AA-sf'; Outlook Negative: off RWN
Class B (ISIN ES0312282017): affirmed at 'AA-sf'; Outlook Negative: off RWN
Class C (ISIN ES0312282025): downgraded to 'BB+sf' from 'BBBsf'; Outlook
Negative; off RWN
AyT Caja Murcia Hipotecario II, FTA:
Class A (ISIN ES0312272000): affirmed at 'AA-sf'; Outlook Negative: off RWN
Class B (ISIN ES0312272018): affirmed at 'A+sf'; Outlook Negative: off RWN
Class C (ISIN ES0312272026): downgraded to 'BB+sf' from 'BBBsf'; Outlook
Negative; off RWN
The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
EMEA Residential Mortgage Loss Criteria
EMEA Criteria Addendum - Spain - Mortgage and Cashflow Assumptions
Counterparty Criteria for Structured Finance Transactions
Counterparty Criteria for Structured Finance Transactions: Derivative Addendum