(The following statement was released by the rating agency)
Oct 11 - OVERVIEW
-- On Aug. 18, 2012, Confederacion Espanola de Cajas de Ahorros (CECA) as the bank accountprovider and swap provider was replaced by Banco Santander as transaction account provider andby Banco Castilla La Mancha (CCM) as swap provider. The bank account agreement now reflects our2012 counterparty criteria.
-- As CCM is not rated, we have conducted our cash flow analysis assuming that thetransaction does not benefit from any support under the swap agreement, and we have concludedthat, among other reasons, AyT Colaterales Global Hipotecario FTA CCM I's class A notes can notmaintain our current 'A- (sf)' rating without the benefit of the swap.
-- Based on the above and on the weak performance of the portfolio, we have thereforelowered to 'BBB- (sf)' from 'A- (sf)' our rating on AyT Colaterales Global Hipotecario FTA CCMI's class A notes.
-- AyT Colaterales Global Hipotecario FTA CCM I is a Spanish RMBS transaction that wasissued in December 2007 by CCM. We did not rate the transaction until February 2011. The class Anotes is the only tranche we rate in this transaction.
-- While reviewing the transaction, we noted an error in our calculation of the reserve fundat the time of assigning our initial rating to the transaction. However, the current ratingreflects our updated analysis.
Standard & Poor's Ratings Services today lowered to 'BBB- (sf)' from 'A- (sf)' and removedfrom CreditWatch negative its credit rating on AyT Colaterales Global Hipotecario FTA CCM I'sclass A notes.
AyT Colaterales Global Hipotecario FTA CCM I is a Spanish residential mortgage-backedsecurities (RMBS) transaction that was issued in December 2007 By Banco Castilla La Mancha (CCM;formerly Caja de Ahorros Castilla La Mancha). We did not rate the transaction until February2011. The class A notes is the only tranche we rate in this transaction.
Today's rating action follows the amendments to the transaction account and swap agreements,with the bank account agreement now reflecting our 2012 counterparty criteria (see "CounterpartyRisk Framework Methodology And Assumptions," published on May 31, 2012). and the replacement ofConfederacion Espanola de Cajas de Ahorros (CECA; BBB-/Stable/A-3) by CCM (Not rated) as swapprovider. Today's downgrade is also due to the poorer than expected performance of thistransaction since we rated it.
Based on the latest available trustee investor report (dated May 2012), the reported ratioof cumulative defaults (defined in this transaction as loans delinquent for more than 18 months)over original portfolio balance was at 6.27% (compared with 3.94% as of November 2010), and thuswell below the first trigger level of 7.00% for the class B notes. We have used currentdelinquency and default information in our credit and cash flow analysis, taking into accountour expected evolution of the portfolio credit quality and structural features.
Based on the May 2012 trustee investor report, 90+ days arrears (long-term delinquencies)have decreased to 0.54% from 1.64% in February 2011 (when we rated this transaction) anddefaults have increased to 4.91% from 4.37% over the same period. These figures are calculatedin terms of the outstanding pool balance.
A cash reserve provides credit enhancement for the class A notes along with thesubordination of junior class. As the balance of the class A notes decreases through sequentialamortization, subordinated tranches increasingly support the class A notes. Additionally, whenwe first rated this transaction in February 2011, the issuer had almost fully drawn on thereserve fund to cover for collateral loans that had defaulted since closing in December 2007.Due to the priority of payments structure and the lack of excess spread in the transaction, thereserve fund will not be fully replenished.
On Dec. 9, 2011, we lowered our rating on the class A notes to the same level as our then'A-' long-term issuer credit rating (ICR) on the swap counterparty, Confederacion Espanola deCajas de Ahorros (CECA; BBB-/Stable/A-3), which was also the transaction account provider. Thedowngrade was due to the breach of remedy action triggers in both the transaction account andswap agreements. Although the remedy period was still in force for the transaction account, ithad elapsed for the swap. Therefore, there was a direct link between our rating on the notes andour rating on the swap counterparty (see "Ratings Lowered On Eight Classes Of Notes In Five AyTSpanish RMBS Transactions After Counterparty Downgrades").
On Dec. 23, 2011, we placed on CreditWatch negative our rating on the class A notes, as theremedy action trigger relating to the transaction account provider, which was CECA at the time,had been breached and the remedy period had elapsed without remedy action taking place (see"Ratings On 43 Tranches In 26 Spanish RMBS Transactions Placed Or Kept On CreditWatch NegativeAfter Bank Rating Actions").
On March 29, 2012, we kept on CreditWatch negative our rating on the class A notes. Giventhe lack of remedy action by CECA as the transaction account provider, and in accordance withour (superseded) 2010 counterparty criteria, we considered in our analysis that there was noreplacement framework in place. Because of this, the maximum rating that notes in thistransaction could achieve was equal to our long-term ICR on CECA, which was on CreditWatchnegative at the time (see "S&P Resolves 14 Spanish RMBS Counterparty-Related CreditWatchPlacements In 10 Transactions").
On April 30, 2012, we lowered to BBB-/Stable/A-3 from BBB/Stable/A-2 our rating on CECA (see"Research Update: Negative Rating Actions On 16 Spanish Banks Following Sovereign Downgrade").On Sept 18, 2012, Banco Santander S.A. (A-/negative/A-2) replaced CECA as transactionaccount provider. Additionally, the downgrade language in the transaction account agreement hasbeen amended to reflect our 2012 counterparty criteria. As such, our rating in this transactionis not constrained by our ICR on the transaction account provider.
On Sept. 18, 2012, CCM replaced CECA as swap counterparty. As CCM is not rated, we haveconducted our cash flow analysis assuming that the transaction does not benefit from any supportunder the swap agreement.
Given the weak performance for the transaction, the fact that the reserve fund has beendepleted almost since closing, and that we do not give benefit to the swap, we have lowered to'BBB- (sf)' from 'A- (sf)' and removed from CreditWatch negative our rating on the class Anotes.
The underlying pool comprises loans secured by mortgages originated by CCM and granted toindividuals for the acquisition of a first home in Spain. More than 60% of the mortgage loansare concentrated in Castilla la Mancha, which is CCM's home region.
While reviewing the transaction, we noted an error in our calculation of the reserve fund atthe time of assigning our initial rating to the transaction. However, the current ratingreflects our updated analysis.
RELATED CRITERIA AND RESEARCH -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
-- Research Update: Negative Rating Actions On 16 Spanish Banks Following SovereignDowngrade, April 30, 2012
-- S&P Resolves 14 Spanish RMBS Counterparty-Related CreditWatch Placements In 10Transactions, March 29, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The TopFive Macroeconomic Factors, March 14, 2012
-- Ratings On 43 Tranches In 26 Spanish RMBS Transactions Placed Or Kept On CreditWatchNegative After Bank Rating Actions, Dec. 23, 2011
-- Ratings Lowered On Eight Classes Of Notes In Five AyT Spanish RMBS Transactions AfterCounterparty Downgrades, Dec. 9, 2011
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top FiveMacroeconomic Factors, Nov. 4, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011 -- Methodology: Credit Stability Criteria, May 3, 2010 -- Update To The Cash Flow Criteria For European RMBS Transactions, Jan. 6, 2009
-- Methodology And Assumptions: Update To The Criteria For Rating Spanish ResidentialMortgage-Backed Securities, Jan. 6, 2009
-- Criteria For Rating Spanish Residential Mortgage-Backed Securities, March 1, 2002