Fitch Upgrades FTPYME TDA CAM 4, FTA's Class B; Error Corrected
OREANDA-NEWS. Fitch Ratings has upgraded FTPYME TDA CAM 4, FTA's class B notes and affirmed the remaining notes as follows:
EUR42.2m Class A2: affirmed at 'Asf'; Outlook Stable
EUR34.1m Class A3(CA): affirmed at 'Asf'; Outlook Stable
EUR66m Class B: upgraded to 'BB+sf' from 'CCCsf'; Outlook Stable
EUR38m Class C: affirmed at 'CCsf'; Recovery Estimate (RE) 0%
EUR29.3m Class D: affirmed at 'Csf'; RE 0%
FTPYME TDA CAM 4, FTA, is a granular cash flow securitisation of a static portfolio of secured and unsecured loans granted to Spanish small- and medium-sized enterprises by Caja de Ahorro del Mediterraneo (now part of Banco de Sabadell).
KEY RATING DRIVERS
Low, Stable Delinquencies
Loans in arrears of more than 90 days account for 0.9% of the portfolio, up from 0.6% one year ago. Delinquencies have been declining from a peak in early 2013 and have been at low levels for the last two years.
The pari-passu class A2 and A3(CA) notes have received EUR43.4m of principal proceeds between them in the last 12 months. Consequently, credit enhancement has increased for all notes over the same period. While this has led to an upgrade for the class B notes, the impact for the class C notes remains limited as these notes are significantly undercollateralised.
Payment Interruption Risk
The highest achievable note rating in this transaction is capped at 'Asf' due to exposure to payment interruption risk. The reserve fund remains depleted and the structure thus lacks a source of liquidity if the servicer defaults and has to be replaced. The class D notes, used to fund the reserve fund, are affirmed at 'Csf' as Fitch does not expect the reserve fund to be replenished back to its target amount before the maturity of the notes.
Note Interest Deferral
Payment of the class C notes' interest is currently subordinated to principal repayment on the notes in the transaction's combined waterfall due to the breach of the relevant cumulative default trigger. The class C notes' deferred interest currently totals EUR0.9m. Given limited headroom on the class B interest deferral trigger, Fitch views it likely that interest on the class B notes will also be deferred in the near future. Fitch expects any class B deferred interest to be repaid by the legal final maturity of the notes.
A 25% increase in the obligor default probability or a 25% reduction in expected recovery rates would not lead to a downgrade of the notes.
Fitch has found that, as part of the analysis performed for the previous surveillance review (rating action commentary dated 3 June 2015), the excess spread for rising interest rate scenarios was calculated incorrectly. This resulted in too low a figure. When corrected, this would have increased the excess spread, and in relation to the class B tranche this would have led to higher model-implied ratings. Model-implied ratings are one of several factors considered by rating committees. This was not a key rating driver for the rating actions listed above.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by TdA as at 29 February 2016
-Transaction reporting provided by TdA as at 31 March 2016