(The following statement was released by the rating agency)
Dec 18 -
-- We have assigned a preliminary ‘A- (sf)’ rating to BBVA-9 PYME’s class A notes.
-- This ABS transaction will securitize a pool of secured and unsecured loans, granted to Spanish SMEs and self-employed borrowers originated by BBVA.
Standard & Poor’s Ratings Services today assigned its ‘A- (sf)’ preliminary credit rating to BBVA-9 PYME, Fondo de Titulizacion de Activos’ class A notes. At closing, the issuer will also issue unrated class B notes (see list below).
This asset-backed securities (ABS) transaction will securitize a pool of secured and unsecured loans granted by Banco Bilbao Vizcaya Argentaria S.A. (BBVA; BBB-/Negative/A-3) to Spanish small and midsize enterprises (SMEs) and self-employed borrowers. BBVA will also act as servicer, paying agent, and treasury account provider.
The main features of the transaction are:
-- The issuer is established as a “fondo de titulizacion de activos” (a Spanish special-purpose entity with the sole purpose of issuing notes). At closing, BBVA-9 PYME will issue class A and class B ABS notes. The class B notes will be fully subordinated to the class A notes.
-- As with other Spanish transactions, interest and principal will be combined into a single priority of payments. The class B notes will have an interest-deferral trigger that will be postponed if cumulative defaults represent more than 5% of the initial balance of the assets. The principal for the class B notes is fully subordinated to the senior class A notes, which will always pay principal on a sequential basis.
-- At closing, the class A notes will benefit from credit enhancement of 32.89%, which is provided by the subordination of the class B notes (14.89%) and the reserve fund that represents 18% of the issuance amount, which will be funded by a subordinated loan. The reserve fund’s purpose is to pay interest shortfalls and principal payments for the class A and B notes during the transaction’s life.
-- There will be only one counterparty in this transaction, BBVA, which will act as servicer, paying agent, and treasury account provider.
-- There will be no interest rate swap agreement in this transaction.
Our analysis has indicated the following key pool characteristics:
-- The preliminary pool comprises secured (36.85% of the preliminary pool) and, unsecured loans granted to Spanish SMEs and self-employed borrowers (about 21.4% of the preliminary pool).
-- There is no significant obligor concentration in the preliminary pool. None of the borrowers will represent more than 1% of the issuance amount.
-- We do not view industry concentration to be significant in the preliminary pool. The top sector--retail trade, excluding motor vehicles and motorcycles--represents 9.48% of the preliminary pool.
-- In terms of geographical concentration, 55.58% of the preliminary pool is concentrated in four regions, Catalunya, Andalucia, Valencia, and Madrid.
-- Of the preliminary pool, about 18.81% consists of fixed-rate loans, while the notes pay a floating-rate of interest. Because there will be no swap in the transaction to hedge this risk, we have applied additional stresses in our cash flow analysis.
-- Not all the loans are paying their installments on a monthly (63.76%) or quarterly basis (27.38%). Of the preliminary pool. 7.14% pays on a semiannual basis, and, nearly 1.62% pays on an annual basis.
-- The weighted-average margin and weighted-average interest rate for the fixed loans can be renegotiated in accordance with the prospectus. The weighted-average margin for the fixed part of the pool can be renegotiated only down to 5.0%, while the weighted-average margin for the floating part can be reduced to 0.5%. The actual weighted-average margin of the pool is 2.63%. We assumed the potential margin after considering renegotiation limits as defined in the prospectus.
Our preliminary rating reflects our assessment of the credit and cash flow characteristics of the underlying preliminary asset pool, as well as our analysis of the counterparty, legal, and operational risks of the transaction. Our analysis indicates that the credit enhancement available to the class A notes is sufficient to mitigate the credit and cash flow risks to a rating level that is higher than ‘A-'. However, our rating is constrained at a ‘A-’ rating level because of the transaction’s exposure to counterparty risk and the remedy action triggers defined in the transaction documentation.
Remedy actions will be taken if the bank account provider is downgraded below ‘BBB-', or if the paying agent is downgraded below ‘BB+'. A commingling reserve will be set up if the servicer is downgraded below ‘BB+'.
We consider that the transaction documents adequately mitigate the counterparty risk from the treasury account provider--BBVA--to a ‘A-’ rating level, in line with our 2012 counterparty criteria (see “Counterparty Risk Framework Methodology And Assumptions,” published on Nov. 29, 2012).
-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012
-- Request For Comment: European SME CLO Methodology And Assumptions, Jan. 17, 2012
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Methodology: Credit Stability Criteria, May 3, 2010
-- Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs, Sept. 17, 2009
-- Update To The Criteria For Rating European SME Securitizations, Jan. 6, 2009
-- European Legal Criteria for Structured Finance Transactions, Aug. 28, 2008
-- Standard & Poor’s Rating Methodology for CLOs Backed by European Small- and Midsize-Enterprise Loans, Jan. 30, 2003
-- 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
BBVA-9 PYME, Fondo de Titulizacion de Activos
EUR470 Million Asset-Backed Floating-Rate Notes
Class Prelim. Prelim.
A A- (sf) 400.00