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TEXT-S&P takes rtg actions in AyT ICO-FTVPO III FTA Ser Caja Rioja

(The following statement was released by the rating agency)

Oct 05 - OVERVIEW

-- On March 28, 2012, we placed our rating on AyT ICO-FTVPO III series Caja Rioja's class A(G) notes on CreditWatch negative for counterparty reasons.

-- On April 30, 2012, we lowered to 'A-' our long-term counterparty credit rating on Banco Espanol de Credito (Banesto; the bank account provider for the transaction). At the same time, we lowered to 'BBB-'our long-term counterparty credit rating on Confederacion Espanola de Cajas de Ahorros (CECA; the swap provider for the transaction). These ratings are below the required level under the transaction documents, which reflect our (superseded) 2010 counterparty criteria.

-- Since then, the remedy period has elapsed and the trustee, on behalf of the counterparties, has not taken any remedy actions for the swap and the bank account agreements. Therefore, our 2012 counterparty criteria constrain our ratings on the class A(G), B, and C notes at our long-term issuer credit rating on CECA as swap provider.

-- We have therefore lowered to 'BBB- (sf)' our ratings on the class A(G), B, and C notes.

-- AyT ICO FTVPO III's series Caja Rioja is a Spanish RMBS transaction that securitizes a static portfolio of mortgage loans originated by Caja Rioja (which is now part of Bankia ), under the ICO-FTVPO subsidy program.

Standard & Poor's Ratings Services today lowered to 'BBB- (sf)' its credit ratings on AyT ICO-FTVPO III Fondo de Titulizacion de Activos' series Caja Rioja's class B and C notes. At the same time, we have lowered to 'BBB- (sf)' and removed from CreditWatch negative our rating on the class A(G) notes (see list below).

Today's rating actions follow the application of our 2012 counterparty criteria and resolve our March 2012 CreditWatch negative placement of our rating on the class A notes (see "Counterparty Risk Framework Methodology And Assumptions," published on May 31, 2012, and "S&P Takes Various Rating Actions In Four AyT ICO-FTVPO Spanish RMBS Transactions," published on March 28, 2012).

On April 30, 2012, we lowered to 'A-' our long-term counterparty credit rating on Banco Espanol de Credito S.A. (Banesto; A-/Negative/A-2) the bank account provider for AyT ICO-FTVPO III's series Caja Rioja. At the same time, we lowered to 'BBB-' our counterparty credit rating on Confederacion Espanola de Cajas de Ahorros (CECA; BBB-/Stable/A-3), the swap provider for AyT ICO-FTVPO III's series Caja Rioja (see "Negative Rating Actions On 16 Spanish Banks Following Sovereign Downgrade," published on April 30, 2012). These ratings are below the required level under the transaction documents, which reflect our (superseded) 2010 counterparty criteria, but not our 2012 counterparty criteria.

Since then, the remedy period has elapsed and the trustee, on behalf of the counterparties, has not taken any remedy actions for the swap and the bank account agreements.

About 80% of the current pool comprises loans with a fixed interest rate. As a result, the transaction relies on the swap to mitigate this risk. Without the support of the swap, the notes would achieve a lower rating.

Consequently, our 2012 counterparty criteria constrains our ratings on the class A(G), B, and C notes at our long-term issuer credit rating (ICR) on CECA as swap provider.

We have therefore lowered to 'BBB- (sf)' our ratings on the class B and C notes. At the same time, we have lowered to 'BBB- (sf)' and removed from CreditWatch negative our rating on the class A(G) notes. Our ratings on these classes of notes are now at the long-term 'BBB-' ICR on CECA.

We consider the transaction's credit performance to be strong because 80% of the pool comprises subsidized loans, which benefit from low monthly installments. If the borrowers were to default, the Spanish government would no longer subsidize the loans. Based on the latest available investor report from the trustee (dated July 2012), the level of loans in arrears for more than 90 days is at 0.09% of the outstanding balance. No loans have defaulted at present.

AyT ICO FTVPO III's series Caja Rioja is a Spanish residential mortgage-backed securities (RMBS) transaction that securitizes a static portfolio of subsidized mortgage loans originated by Caja Rioja (which is now part of Bankia S.A.; BB+/Watch Neg/B), under the ICO-FTVPO subsidy program.

RELATED CRITERIA AND RESEARCH

-- Spanish RMBS Index Report Q2 2012: High Mortgage Arrears Persist As the Economy Worsens, Aug. 20, 2012

-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012 -- Negative Rating Actions On 16 Spanish Banks Following Sovereign Downgrade, April 30, 2012

-- S&P Takes Various Rating Actions In Four AyT ICO-FTVPO Spanish RMBS Transactions, March 28, 2012

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

-- Rating Actions Taken On 41 Tranches In 21 Spanish RMBS Transactions Following Rating Actions On Counterparties, Feb. 23, 2012

-- Banco Santander S.A. And Core Subs Ratings Lowered To 'A+/A-1' On Spain Downgrade And BICRA Revision; Outlook Negative, Feb. 13, 2012

-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011

-- Principles Of Credit Ratings, Feb. 16, 2011 -- Methodology: Credit Stability Criteria, May 3, 2010

-- Methodology And Assumptions: Update To The Cash Flow Criteria For European RMBS Transactions, Jan. 6, 2009

-- Methodology And Assumptions: Update To The Criteria For Rating Spanish Residential Mortgage-Backed Securities, Jan. 6, 2009

-- Criteria for Rating Spanish Residential Mortgage-Backed Securities, March 1, 2002 RATINGS LIST Class Rating To From AyT ICO-FTVPO III Fondo de Titulizacion de Activos EUR110.8 Million Mortgage-Backed Floating-Rate Notes Series Caja Rioja Ratings Lowered B BBB- (sf) AA (sf) C BBB- (sf) A (sf) Rating Lowered And Removed From CreditWatch Negative A(G) BBB- (sf) AA (sf)/Watch Neg

((Bangalore Ratings Team, Hotline: +91 80 4135 5898 swati.ray@thomsonreuters.com,Group id:BangaloreRatings@thomsonreuters.com,Reuters Messaging: swati.ray.thomsonreuters.com@reuters.net))